Microsoft has released its financial results for the 2026 fiscal year, revealing a 7% decrease in Xbox revenue compared to the previous year, equivalent to $1.7 billion. The fourth quarter (April to June 2026) saw Xbox revenue down 10% year-over-year, attributed to strong first-party performance despite only two first-party releases in that period.
Revenue Decline
Hardware revenue fell 13% compared to the previous quarter and declined 29% for the full year, driven by lower console sales. This follows a recent price hike for Xbox Series X/S consoles, which is expected to further impact sales. The company is banking on upcoming exclusives like Gears of War: E-Day to boost console sales, but its messaging around exclusivity has been inconsistent.
Microsoft also announced layoffs of 3,200 employees, with half affected immediately and the remainder by July 2027. Several studios have been closed or impacted, including id Software, which reportedly suffered significant cuts.
Executive Outlook
Xbox boss Asha Sharma stated on X: “In FY26, over 200 million new players came to Xbox and our games, but our business did not grow with our audience. We need to close that gap by investing in what players value. That will take time, but we expect to return to growth by the end of FY27.”
Microsoft CEO Satya Nadella said during an investor call: “When it comes to Xbox, we are making the necessary decisions required across our content portfolio, platform, and operations to reset the business for long term growth. 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.”
Both executives are optimistic about a turnaround within the next 12 months, though analysts remain skeptical given the competitive landscape and the upcoming release of GTA 6, which is expected to drive PlayStation 5 sales rather than Xbox hardware.
