Xbox Revenue Drops as Microsoft Reports Slower Console Sales

Microsoft reported a weaker year for Xbox in its latest financial results, with Xbox revenue down 7% for the full fiscal year and down 10% in the fourth quarter, the three months ended June 30, 2026.

Game Pass growth helped soften the full-year decline, but hardware was the biggest drag. Xbox hardware revenue fell 29% for the year due to lower console sales, and dropped 13% in the fourth quarter.

The wider company is still growing. Microsoft posted $90 billion in revenue for the quarter, up 18% year over year, with net income rising 31% to $35.8 billion. For the full year, revenue reached $331.8 billion, up 18%, driven largely by cloud and business software.

Xbox’s content and services business also fell in Q4, down 10% compared with the same period last year. Microsoft said the prior-year quarter had benefited from stronger first-party game performance.

The results come alongside a broader restructuring at Microsoft. According to the company’s official post, 4,800 roles were cut across the organization, about 2.1% of its global workforce. The source material says 1,600 of those cuts were at Xbox, with more reductions planned through fiscal 2027 for a total of 3,200 roles.

The shake-up also affects several Xbox studios. Double Fine Productions and Compulsion Games have become independent, while Undead Labs and Ninja Theory have started talks around new ownership. Arkane Lyon has entered consultation proceedings to review possible options.

Microsoft CEO Satya Nadella said the company expects Xbox to return to growth in fiscal 2027. For now, the numbers point to a tougher stretch for the console side of the business, even as subscriptions and Microsoft’s larger cloud divisions continue to carry more of the weight.