Microsoft has released its financial results for the first quarter of fiscal year 2026 (July 1 – September 30, 2025), showing a drop in Xbox division revenue compared to the same period last year. The main reason is the continuing decline in hardware sales, partly offset by stable income from content and services.
Revenue Breakdown and Game Pass Growth
In detail, Microsoft reported a $113 million decrease in gaming revenue, equal to a 2% year-over-year drop. Revenue from content and services remained nearly flat (+1% or unchanged at constant currency). Notably, Xbox Game Pass subscriptions and third-party content sales grew, though this was balanced by weaker performance from first-party titles.
Hardware Decline and Future Outlook
On the hardware side, which includes Xbox consoles, the decline was more severe: down 29% year over year (–30% at constant currency). This is not an isolated event—the same quarter last year also showed a 29% drop, confirming a clear negative trend.
In fact, this marks the 13th declining quarter out of 17 since 2022. For now, Xbox consoles show no signs of recovery. It will be interesting to see in future reports whether the launch of the ROG Xbox Ally can help reverse this trend. Similarly, the recent Game Pass price increases in early October could have a major impact on upcoming financial results.
