Xbox console sales revenue dropped by 14%, while Game Pass and third-party game earnings continue to decline

Earlier, Microsoft CEO Satya Nadella expressed confidence that Xbox would be able to return to growth before the end of fiscal year 2027.

Microsoft reported a decline in revenue for its Xbox gaming division for the first quarter of fiscal year 2027. Hardware sales revenue fell by 14% compared to the same period last year, while content and services revenue decreased by 2%.

The decline in content and services revenue was primarily driven by a drop in revenue from third-party games and the Xbox Game Pass subscription model. At the same time, revenue growth from Microsoft’s first-party games partially offset these losses.

The Devices and Consumer segment, which combines a number of Microsoft consumer products and services, also showed a decline. For the reporting quarter, its revenue totaled $15.5 billion, down 3% year-over-year.

Following the arrival of Asha Sharma as the head of Xbox, Microsoft began revising its business development strategy. The overhaul was accompanied by employee layoffs and studio reorganizations, though certain decisions by the new leadership drew a positive reaction from players.