Chris Kerr,

Senior Editor, News,GameDeveloper.com

July 30, 2026

2 Min Read

Xbox hardware revenue decreased by 7 percent—or around $1.7 billion—during the fiscal year ended June 30, 2026. According to Microsoft, that downturn was driven by a decline in Xbox content and services and diminishing console sales.

"Xbox content and services revenue decreased 5 percent on a prior year comparable that benefited from strong first-party content performance, offset in part by growth in Xbox Game Pass," explains the tech giant's latest 10-K filing. "Xbox hardware revenue decreased 29 percent driven by lower volume of consoles sold."

During the fourth quarter, specifically, Xbox content and services revenue decreased 10 percent.

Microsoft's console hardware business has been in decline for some time. The company has struggled to shift Xbox hardware in recent years, despite spending billions on major acquisitions including the near-$70 billion purchase of Call of Duty maker Activision Blizzard.

Related:Subnautica 2 and PUBG bolster Krafton's Q2 revenue

The company has also seen fit to repeatedly increase the price of flagging Xbox hardware, with Microsoft attributing its latest price hike to an ongoing component crisis driven by widespread investment in AI data centres.

Meanwhile, Microsoft continues to sink billions into supporting its own AI efforts. Earlier this month, the company reported over $130 billion in new data centre leases (thanks, Bloomberg).

Mass layoffs have also become part-and-parcel of Microsoft's gaming strategy. In July, the company confirmed plans to eliminate 3,200 roles across its video game division before the end of the current fiscal year in June, 2027—starting with 1,600 layoffs across notable studios including id Software, Obsidian, and ZeniMax Online Studios.

Xbox has also divested from notable internal studios including Double Fine and Compulsion Games.

Discussing that rightsizing, Microsoft CEO Satya Nadella said the company is making the "necessary decisions required" in order to reset the business for long-term growth, echoing the sentiments offered by Xbox CEO Asha Sharma when she announced the cuts earlier this month.

"We have the best IP in the industry, and talented studios around the world, and believe we can bring these strengths together and expect to return the business to growth in fiscal 2027," added Nadella.

Growth might be the promise, but numerous Xbox developers impacted by the latest round of cuts recently told Game Developer the division is at risk of falling apart after losing so much talent and institutional knowledge.

Microsoft is also facing legal action from labor unions in the United States and Canada for allegedly mishandling its fifth round of mass layoffs in three years.

Related:Tencent-owned Lightspeed LA is laying off staff

About the Author

Chris Kerr

Senior Editor, News, GameDeveloper.com

Game Developer news editor Chris Kerr is an award-winning reporter with over a decade of experience in the game industry. His byline has appeared in notable print and digital publications including Edge, Stuff, Wireframe, International Business Times, and PocketGamer.biz. Throughout his career, Chris has covered major industry events including GDC, PAX Australia, Gamescom, Paris Games Week, and Develop Brighton.