Xbox Console Sales Revenue Drops 14 Percent Amid Declines for Game Pass and Third-Party Games

Microsoft reported a decline in revenue for its Xbox gaming division during the first quarter of fiscal year 2027.

Previously, Microsoft CEO Satya Nadella expressed confidence that Xbox would return to growth by the end of fiscal year 2027. Hardware revenue dropped by 14% compared to the same period last year, while content and services revenue decreased by 2%.

The decline in content and services revenue stems primarily from lower earnings from third-party games and the Xbox Game Pass subscription model. At the same time, revenue growth from Microsoft’s internal studios partially offset these losses.

The Devices and Consumer segment, which combines several Microsoft consumer products and services, also saw a downturn. During the reported quarter, its revenue reached $15.5 billion, marking a 3% decrease from the previous year.

Following Asha Sharma’s appointment as head of Xbox, Microsoft began revising its business strategy. This restructuring involved layoffs and studio reorganization, though certain decisions made by the new leadership generated positive reactions from players.