It was previously revealed that Microsoft's gaming division would focus resources exclusively on profitable projects.
In its latest report for the first quarter of fiscal year 2026 (July–September 2025), Microsoft disclosed the results of the Xbox gaming division. Total gaming revenue decreased by 2% — from $5.621 billion to $5.508 billion, resulting in a year-over-year loss of approximately $113 million.
The key reason for the decline was a sharp drop in hardware sales: Xbox revenue fell by 29% due to lower console sales.
Despite this, Xbox content and services revenue increased by 1% due to growth in Xbox Game Pass subscriptions and third-party content sales, partially offsetting the decline.
