Microsoft says that Xbox hardware sales have gone down 29%, leading to a roughly $113 million revenue loss year over year. The news comes after, earlier in October, the company increased the price of Game Pass to much controversy.
Xbox, despite having some well-received titles recently like Ninja Gaiden 4 and The Outer Worlds 2, has had a rough time recently. Massive cancellations of Game Pass and even removal from Costco have not done well for the gaming team at Microsoft. Unfortunately, it seems like it has spread to its sales, as the company reports a 2% loss in total revenue.
Microsoft Reports Notable Drop in Sales for Xbox Compared to Last Q1
In the Fiscal Year 2026 (FY26) Q1 report from Microsoft, the company revealed that Xbox did not reach the same heights as it did last Q1 for FY25. Having made $5.621 billion last Q1, the gaming subcompany went down to $5.508 billion, losing around $113 million. This also marks a 2% loss in total revenue, which is not great, but not too bad. The press release does mention the drop, stating,
“Xbox hardware revenue decreased 29% driven by lower volume of consoles sold,” the company said. “Xbox content and services revenue increased 1% on a strong prior year comparable with growth in Xbox Game Pass and third-party content, offset in part by a decline in first-party content.”
It’s important to note that the mentioned 1% increase comes from splitting content and services away from hardware, showing how each specific subsector is performing.
Whether Xbox can regain ground from its loss remains to be seen. It recently announced that Halo: Campaign Evolved is coming to PlayStation, continuing the company’s third-party movement forward. Xbox is planning a big year in 2026 with releases like Forza Horizon 6, Clockwork Revolution, and Fable. It’ll be interesting to see how it pans out and whether it can save face, regardless of how good its new games could be.
Overall, for Microsoft, the numbers aren’t bad as the company announced its operating income was up 24% to $38 billion while it saw a 12% total net income increase to $27.7 billion.
What do you think about the revenue drop for Xbox? Are you surprised by it? What do you hope Microsoft does to fix it? Let us know in the comments and on the official Insider Gaming Discord!
For more Xbox, check out Microsoft’s plan for gaming on different consoles and the removal of DLC discounts. Make sure to subscribe to our weekly newsletter for more!
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