Microsoft's quarterly financial update for the third quarter of the current fiscal year is in, and console numbers are still declining. According to the stats provided, revenue from Xbox hardware continues to drop, as do associated first-party sales.
In the earnings report for the last three months, it's stated that "Xbox hardware revenue declined 33%." That's a substantial dip on its own, but when taken in context of the last two quarters, you get a pretty grim picture of how many consoles Microsoft is selling right now.
The report for quarter one had Xbox sales down 29%, and then they dropped 32% again in quarter two. Those are dispiriting statistics for the rival to PlayStation, although we don't have any kind of exact numbers, nor further context, such as whether sales have fallen more in one particular region over any others.
Xbox earnings today. While we have made progress expanding the business and our margins, player and revenue growth has not yet met our ambition. We know we have work to do to earn every player today and into the future.April 29, 2026
Meanwhile, "Xbox content and services" - meaning Game Pass and associated digital sales - is down 5% this quarter, the same as last quarter, and up from the 1% drop in quarter one. It's stated that last year the company "benefited from strong first-party" performance. You can probably pin some of this on the declining home console sales, while it's likely not as steep due to Game Pass availability on PC.
"We expect revenue to decline in the low-teens, reflecting a prior year comparable that benefited from strong first-party content," Amy Hood, chief financial officer at Microsoft, said during the call, "as well as the recent price changes for Xbox Game Pass as we focus on delivering more value to gamers. Hardware revenue should decline year-over-year."
There's been some upheaval at Xbox in recent months. Phil Spencer left, now replaced by Asha Sharma, who spoke about the state of things on Twitter. "While we have made progress expanding the business and our margins, player and revenue growth has not yet met our ambition," she posted. "We know we have work to do to earn every player today and into the future."
The Microsoft Gaming label was reverted back to Xbox in recent weeks, and the "Everything is an Xbox" campaign was quietly shelved, too. Things can shift in this industry quite quickly, and it seems like the division is finding its feet again. We'll see what the numbers say next quarter.
