Microsoft reports drop in Xbox content revenue and hardware sales

This week, Microsoft held its quarterly earnings call, revealing that while revenues are up overall thanks to things like Azure Cloud and AI investments, things at Xbox have taken a fall. In particular, Xbox hardware sales are down by 32% compared to the same Q2 period last year. 

Typically, we expect to see console sales making a jump between October and December due to things like Black Friday and Christmas. However, Microsoft opted to not offer any Black Friday discounts in 2025 and to make matters worse, the company had raised the prices of its consoles to the highest point since launch. As a result, Xbox console and accessories revenue dropped by 32% year-over-year.

The content and services portion of Xbox didn't fall quite as drastically but it did still see a dip, falling by 5% year-on-year, despite major launches like The Outer Worlds 2 and Call of Duty: Black Ops 7 during this time period. This would suggest that COD sales this year were weaker than the previous year, which would explain why Activision announced shortly after launch that it would no longer be doing back-to-back years for Modern Warfare or Black Ops moving forward.

Overall, Xbox revenue was down by 9%, but Microsoft as a whole had actually seen revenues increase by 17%, with the heavy lifting coming from Azure and AI initiatives.

Xbox content may see stronger performance later this year. Titles like Gears E-Day, Halo: Campaign Evolved, Fable, Forza Horizon 6 and a potential PS5 release for Starfield are all expected to land in 2026.

KitGuru Says: It has been clear for a while that Microsoft has lost the current console generation. The company is likely to consider more of a push towards multi-platform game releases to improve the situation, even if it comes at the expense of future hardware sales. 

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