- Microsoft reported a $1.7 billion drop in Xbox revenue for Q4 2026, marking a 7% decline driven by lower sales in both content and hardware.
- Xbox CEO Asha Sharma expressed optimism about future growth, stating, 'We expect to return to growth by the end of FY27.'
- Revenue for Xbox content and services decreased by 5%, while hardware revenue saw a significant drop of 29% due to lower console sales.
- Operating income decreased by 14% year-over-year, with operating margins falling to 21%.
- Over 200 million new players joined Xbox in FY26, but the business did not grow alongside this increase.
- Microsoft CEO Satya Nadella emphasized the need for necessary decisions across the content portfolio to reset the business for long-term growth.
- Xbox has faced significant cuts, including approximately 1,600 layoffs expected over the next 12 months.
- Asha Sharma has signaled a shift in investment strategy, focusing on major franchises like *The Elder Scrolls* and *Fallout*.
Microsoft's Xbox division reported a significant $1.7 billion revenue decline for Q4 2026, marking a 7% decrease. This downturn was primarily driven by a 5% drop in content and services revenue and a staggering 29% decline in hardware sales due to lower console volumes.
Despite these challenges, CEO Asha Sharma expressed optimism about future growth, emphasizing the need to invest in areas that players value. “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,” Sharma stated.
The fiscal year also saw over 200 million new players joining Xbox, yet the business did not grow in tandem with this audience expansion. Operating margins fell to 21%, prompting significant restructuring, including 1,600 layoffs planned over the next year.
In a related earnings call, Microsoft CEO Satya Nadella reiterated the company's commitment to resetting the Xbox business for long-term growth, stating, “When it comes to Xbox we are making the necessary decisions required across our content portfolio, platform, and operations.”8
Additionally, the price of the standard Xbox Series X has increased to $750, reflecting a 33% jump since its launch in 2020, further complicating the sales landscape.
“Xbox's revenue decreased by 7% due to a 29% drop in hardware sales and a 5% decline in content and services. Despite these challenges, Asha Sharma emphasized the need for investment in player-valued areas, aiming for a return to growth by the end of FY27.”
Kotaku
