Xbox's first-party content sales have partially helped to mitigate a 2% decline in revenue for the first quarter, while hardware sales have fallen by 14%

Microsoft has surpassed expectations for the first quarter, achieving a revenue of $92.3 billion. Net income and earnings per share have also seen an uptick.

Revenue in the devices and consumer sector, which includes Xbox, fell by 3% to $15.5 billion. Xbox content and services also experienced a 2% decline, mainly attributed to reduced third-party content and Game Pass activity.

Financial Summary

For the quarter ending September 30, 2026:

• Total Revenue: $92.3 billion, a 19% increase compared to the previous year.
• Net Income: $36.6 billion, reflecting a 32% rise year-over-year.
• Devices and Consumer Revenue: $15.5 billion, showing a 3% decrease from last year.

Key Insights

The slight dip in Xbox content and services revenue was somewhat balanced by an uptick in first-party content, highlighted by Minecraft, which achieved record levels of engagement and earnings.

The cost for devices and consumer revenue went down by 8%, owing to decreased amortization of assets following the Activision acquisition, and a 14% drop in hardware revenues.

Microsoft reported a 3% decline in operational expenses for Xbox, though this was counteracted by investments in computing capabilities and staffing.

"Xbox revenue declined by 2% year-over-year in Q1, an improvement over the previous quarter's 10% drop, and our accountability margin has improved," said Xbox CEO Asha Sharma.

Sharma added that "Minecraft and World of Warcraft Forever both achieved record-breaking performances," with a highly acclaimed release of Call of Duty. While PC platform revenues saw significant growth, console sales continued to be constrained by limited supply.

Efforts to increase console availability are ongoing, with the introduction of an expanded refurbishment initiative. "We have made some progress, but there's still a lot to do," Sharma noted.

Microsoft's EVP and CFO, Amy Hood, anticipates mid to high single-digit growth in Xbox content and services revenue for Q2, driven by new content releases from both third- and first-party developers.

CEO Satya Nadella stressed Microsoft's dedication to game development and broadening their reach across various platforms, including consoles, PCs, mobile, and cloud.

Nadella expressed optimism for the holiday season, citing strong first- and third-party lineups with last week’s Call of Duty release and the upcoming Grand Theft Auto 6 launch next month for Xbox.

Earlier this month, Sharma informed employees that Xbox is "returning to growth" and that reinvestment strategies are yielding positive results.

After experiencing historical lows, Xbox is now seeing growth rates two to three times higher than before, with expectations for this trend to persist.

Recent launches such as Gears of War: E-Day, Minecraft Dungeons 2, and World of Warcraft Forever received strong feedback upon release.

Xbox continues restructuring, leading to a 20% reduction in its workforce, with further layoffs expected before year's end and into early next year.

Microsoft recently offered voluntary exit programs to up to 60,000 employees worldwide, including those in the US, UK, Canada, and India, affecting Xbox employees among others.