Xbox in Trouble: Declining Revenue and Hardware Sales in Q3 Fiscal 2026

The financial results for the third quarter of fiscal year 2026 show a contrasting picture for Microsoft. On one hand, the company recorded overall positive performance, with revenues amounting to $82.9 billion and an 18% year-over-year growth. On the other hand, the Xbox division continues to show signs of difficulty.

During the period from January 1 to March 31, the gaming segment experienced a contraction of 7% compared to the same quarter of the previous year. This decline is primarily attributed to the decrease in revenues from Xbox content and services, which also includes the Game Pass subscription. In this area, the drop is around 5% year-over-year, which becomes approximately 7% in constant currency.

While the decline in services can be considered relatively contained, the situation appears decidedly more critical on the hardware front. Sales of Xbox Series X|S consoles recorded a significant decrease of 33% compared to the previous year, a figure that rises to 34% in constant currency. This marks a notable worsening, fitting into a negative trend already evident in previous years, with a decline of 6% in 2025 and even 31% in 2024.

Is the Xbox business gradually weakening? These numbers suggest a progressive weakening of the Xbox hardware business, which is becoming less relevant within the overall gaming division. The continued contraction in sales makes it difficult to envision a significant recovery for the current generation of consoles. In light of this situation, attention inevitably shifts towards the future.

In particular, interest is growing in the upcoming Microsoft platform, referred to as Project Helix, which could represent a turning point for the brand. The new hardware will be tasked with revitalizing a segment in evident difficulty and reversing a negative trend that has been ongoing for several years.

"Although we have made progress in expanding our business and increasing our margins, the growth in the number of players and revenues has not yet reached our goals. We are aware that there is still much to do to earn the trust of every player, today and in the future," commented Xbox CEO, Asha Sharma.