Xbox revenue has declined significantly by $1.7 billion, while hardware sales have fallen 29% compared to the previous year

In its recent financial disclosure, Microsoft reported a 7% annual and 10% fourth-quarter reduction in Xbox-related earnings.

Although Game Pass exhibited promising growth, hardware revenue saw a 29% fall due to a decrease in console sales.

Key Figures

Covering the quarter ended June 30, 2026:

• Revenue: $90 billion, marking an 18% rise from the previous year
• Net income: $35.8 billion, a 31% year-on-year increase
• More Personal Computing (including Xbox) revenue: $12.9 billion, showing a 4% drop from last year

Significant Developments

CEO Satya Nadella noted that Microsoft had a "strong finish to a record-breaking fiscal year" in Q4.

"We aim to empower every individual with AI to boost their capabilities," Nadella expressed. "Additionally, we want to help every enterprise create their own learning framework, keeping their core intellectual property intact."

The overall revenue growth for Microsoft can be attributed to its Cloud division, which surged by 27% to $59.3 billion.

The company's Intelligent Cloud offering expanded by 32% to $39.3 billion, while the Productivity and Business Processes segment rose 14% to $37.8 billion.

The 4% decrease in More Personal Computing revenue was largely due to a 10% decline in Xbox content and services.

The previous year had seen Xbox benefit from strong first-party content performance, the company stated.

Hardware revenue experienced a 13% decline, with further reductions expected in the coming year.

For the entire fiscal year, Microsoft reported an 18% jump in total earnings to $331.8 billion. Operating income climbed 21% to $155.2 billion, and net income rose 22% to $133.7 billion.

Post the financial results, Microsoft initiated layoffs affecting 4,800 positions company-wide, accounting for a 2.1% reduction in the global workforce. Notably, 1,600 roles were cut from Xbox, with plans for additional reductions totaling 3,200 by FY27.

"We are implementing necessary adjustments in our content lineup, platform, and procedures to secure long-term growth," Nadella explained.

"With industry-leading intellectual property and talented studios worldwide, we expect to drive business growth in fiscal 2027."

The restructuring saw four studios transition to new leadership. Double Fine Productions and Compulsion Games achieved independence, while discussions for new ownership began for Undead Labs and Ninja Theory.

Arkane Leon entered consultations to explore strategic possibilities.

Following its separation from Xbox, Double Fine cut 23 roles earlier this week.

"The business landscape is evolving, prompting changes in our operations," stated Amy Coleman, Microsoft’s EVP and chief people officer.

"Technological development, deployment, and usage are undergoing rapid transformation. As customer needs and service models adapt, so must our focus and organizational structure."