The vibes around Xbox aren't great right now, and Microsoft's latest financial report puts some hard numbers to that feeling. Hardware revenue continues to decline, and gaming revenue as a whole is effectively flat. That's not typically the kind of thing growth-minded investors like to hear – especially when Microsoft's cloud and AI services under the Azure brand are continuing to rapidly expand.
"Gaming revenue decreased $113 million or 2% driven by a decline in Xbox hardware, offset in part by growth in Xbox content and services," Microsoft says in its FY26 Q1 financial report. "Xbox hardware revenue decreased 29% driven by lower volume of consoles sold. 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."
