Microsoft has posted its earnings results for the latest quarter and while it’s been a strong period for the company as a whole, the Xbox gaming division is struggling. Though Microsoft posted an overall revenue increase of 17% year-on-year, gaming revenue is down 9%–with console sales making up a large part of that decline.
Microsoft’s Q2 FY26 results generally look great for the tech behemoth, with the company boasting a staggering $81.3 billion revenue largely driven by its cloud and business divisions, but Xbox isn’t looking so healthy right now.
Microsoft’s gaming division revenue declined 9% as a whole, with a 5% decrease in revenue from content and services, which includes Game Pass. Microsoft explains that this decline can be mostly attributed to strong first party content the year prior, and predicts that Q3 will see a similar decline in the single digits for the same reason.
Xbox gaming hardware revenue has declined for the last three financial years, and isn’t set to break that trend any time soon, with a 32% decline year-on-year. Microsoft expects this trend to continue into 2026, too.
Despite the downward trends, Microsoft expects Game Pass to continue to grow through the next quarter–though the company hasn’t given a public update on subscriber numbers since it reached the milestone of 34 million subscribers in early 2024.
Xbox has continued to lean on its subscriptions and content as its hardware sales slow, bringing more of its first party games to platforms that were once considered Xbox’s rivals. The Halo franchise will be released on a PlayStation console for the very first time with this year’s release of Halo: Campaign Evolved, and the upcoming Fable reboot will launch simultaneously on PS5 and Xbox Series X|S.
