Xbox Revenue Falls 2% to $5.38B as Hardware Drops 14%

Microsoft's Xbox business brought in $5.379 billion in the three months to 30 September 2026, down from $5.508 billion a year earlier, according to the company's fiscal 2027 first-quarter results, published on 28 October ahead of its 21:30 UTC (5:30 PM ET) earnings call.

That is a drop of $129 million, or 2.3% by our calculation; Microsoft rounds it to 2%. Xbox content and services revenue fell 2% (1% in constant currency) and Xbox hardware revenue fell 14%, as the rest of Microsoft grew 19% to $92.3 billion on cloud and AI demand.

The numbers

Dollar figures from Microsoft's product and service revenue table, with the prior year recast to the segments Microsoft introduced in September 2026. Microsoft gave percentage changes only for content and services and for hardware. Share and dollar change are NextPlayIntel calculations.

Why Xbox revenue fell

On the earnings call, CFO Amy Hood said the content and services decline was "driven by declines in third-party content and Xbox Game Pass, partially offset by growth in first-party content". Microsoft did not give a new Game Pass subscriber number.

Operating expenses in the Devices and Consumer segment fell 3%, which Hood said was driven by Xbox. The segment's operating margin rose to 35%, helped by lower amortisation of intangible assets from the Activision Blizzard acquisition.

CEO Satya Nadella pointed to a record quarter for Minecraft in engagement and revenue, the largest beta in World of Warcraft history, and a holiday slate that includes Call of Duty: Modern Warfare 4 and Grand Theft Auto VI, which is due on 19 November.

Xbox CEO Asha Sharma said on X that PC platform revenue grew by double digits and that console sales were limited by supply, with more demand than available consoles, The Verge reported.

What Microsoft expects for October-December

• Xbox content and services: growth in the mid to high single digits, helped by first- and third-party launches. Hood expects growth to be strongest in this quarter, then slow in January-March and again in April-June.

• Xbox hardware: revenue to decline year on year again.

• Devices and Consumer: revenue of $15.9 billion to $16.4 billion.

Our take

Xbox is shrinking as a share of Microsoft. It made up 7.1% of company revenue a year ago and 5.8% now, because Azure alone grew by more than $10.7 billion in the same period. The guidance depends on two big third-party launches, Modern Warfare 4 and GTA VI, landing in October-December. A recovery in content and services would be driven by software, not consoles.

What is not confirmed

Microsoft did not give an Xbox hardware revenue figure in dollars, a Game Pass subscriber count, or unit sales for consoles. Reports of further Xbox layoffs in November and January remain unconfirmed.