Xbox hardware revenue falls 14% as Game Pass slips
Microsoft's July–September results show Xbox hardware revenue down 14% and content and services down 2%, with Game Pass and third-party games declining.
LandGadget Newsroom · · 3 min read
Microsoft's gaming business is still shrinking on the hardware side. In its results for the July–September 2026 quarter (the first quarter of its 2027 fiscal year), the company reported that Xbox hardware revenue fell 14% compared with the same period a year earlier.
The numbers
Xbox content and services, which covers game sales, Game Pass subscriptions and in-game purchases, fell 2% (down 1% in constant currency). Microsoft attributed the drop to declines in third-party content and Xbox Game Pass, partly offset by growth in first-party content, meaning games from its own studios, including Activision Blizzard titles.
In Microsoft's product revenue table, the Xbox line came to $5.38 billion, down from $5.51 billion a year earlier. Elsewhere in the same Devices and Consumer segment, Windows OEM and devices revenue fell 22%.
| Xbox, Jul–Sep 2026 | Change year over year |
|---|---|
| Hardware | −14% |
| Content and services | −2% (−1% in constant currency) |
| Total Xbox revenue | $5.38B vs $5.51B |
What Microsoft expects next
On the earnings call, CFO Amy Hood said Microsoft expects Xbox content and services revenue to grow in the mid to high single digits in the October–December quarter, helped by the timing of first- and third-party game launches. She said growth should be strongest in that quarter and then slow. Hardware revenue is expected to fall again year over year.
The Verge notes that Microsoft again gave no new Game Pass subscriber figure. The last official number, 34 million, is now more than two years old. Xbox CEO Asha Sharma said the company is "working to get more consoles into players' hands, including through our expanded refurbishment program", and she has previously promised to return Xbox to player and revenue growth by the end of the fiscal year in June 2027.
What it means for players
Falling console revenue is no surprise this late in a console generation, especially after price increases. Microsoft is also putting more of its games on PC and other platforms. For players, Microsoft's push for growth from software means the subscription and the multiplatform releases matter more than the box itself. If you mostly play on a PC or a TV without a console, our cloud gaming explainer covers how Xbox Cloud Gaming and its rivals work, and our PC game controller buying guide helps you pick a pad.
The next big test is the holiday quarter, with blockbuster releases such as GTA VI approaching.
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