Xbox Revenue is Reportedly Down, According to Latest Earnings

Microsoft has released its Q2 FY26 earnings report, highlighting a significant decrease in revenue across gaming, hardware and content across the Xbox brand.

According to the latest earnings report, Xbox has reported lower revenue for the company. Its Q2 FY26 spans from October 1, 2025, to December 31, 2025. During this period, Microsoft’s gaming revenue decreased by 9 percent. Additionally, Xbox hardware revenue was down 32 percent while content and services revenue was down 5 percent.

During this same period, however, Microsoft reports strong adoption of PC and Xbox Cloud Gaming. Microsoft CEO Satya Nadella notes, “In gaming, we are committed to delivering great games across Xbox, PC, cloud, and every other device, and we saw record PC players and paid streaming hours on Xbox.”

However, despite this, Microsoft CFO Amy Hood admitted that revenue for content and services was below expectations. Hood cites strong first-party delivery the year prior, making up for a decrease when it came to the same window last year. During that period, Microsoft delivered games like Indiana Jones and the Great Circle, Call of Duty Black Ops 6, and Microsoft Flight Simulator 2024. During Q2 FY26, the company released titles like The Outer Worlds 2, Keeper, and Call of Duty: Black Ops 7, the latter of which has been critically panned with reports that the game has been underselling.

During the same webcast postmortem, Hood states that the company expected Xbox hardware to drop again in Q3. That being said, Microsoft is hopeful that the growth of Xbox Game Pass can offset that decrease. Though there’s no certainty, as the company isn’t expected to drop a major title for the Xbox brand until Forza Horizon 6 later in May.

The Xbox brand has been spiralling into a pivot away from a dedicated console manufacturer with first-party support to a third-party publisher. Games such as Sea of Thieves, Forza Horizon 5, Gears of War Reloaded, and many other tentpole titles have made their way to PlayStation in an effort to bolster the company’s profitability since the $69 billion USD (around $96 billion CAD) acquisition of Activision Blizzard. Since that time, Microsoft has reportedly forced the Xbox brand to hit 30 percent profit margins, resulting in game cancellations, price hikes and mass layoffs.