Xbox reports 10 percent drop in revenue across content and services, amid its mass job cuts and studio offload

Microsoft’s Xbox division reported a significant revenue decline for its fiscal 2026 year ending June 30, 2026. Xbox content and services revenue dropped 10 percent in the fourth quarter, while hardware revenue plummeted 29 percent year-over-year due to declining console sales. Overall, Xbox revenue declined by 7 percent—approximately $1.7 billion—for the full year.

The financial downturn follows a sweeping restructuring of the division that included mass layoffs and the offloading of development studios. However, growth in Xbox Game Pass partially offset the annual decline in services revenue.

Despite Xbox’s struggles, Microsoft’s overall performance remained strong, with total company revenue reaching $90 billion, up 18 percent year-over-year. The company’s cloud and AI initiatives drove much of this growth, which was highlighted prominently in the earnings report.

Xbox CEO Asha Sharma, who took the helm in February, expressed confidence in the division’s recovery prospects. In an earnings call and internal memo, Sharma stated that Xbox expects to “return to player and revenue growth” by the end of fiscal year 2027 and improve profits back to industry-average levels. She emphasized the need to “invest in what players value” as part of the division’s reset strategy.

Operating expenses increased by 8 percent during the period, which company officials attributed to restructuring investments. Sharma indicated that every function and studio within Xbox will be responsible for contributing to the projected turnaround.

Sources

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