Xbox Revenue Declines 2% in September 2026 Quarter, Hardware Revenue Falls 14% - Sales
by William D'Angelo , posted 8 hours ago / 3,843 Views
Microsoft has released its earnings report for the first quarter of the 2027 fiscal year, which ended up September 30, 2026.
Total Xbox revenue was $5.38 billion for the quarter, which is down two percent from $5.51 billion in the same period a year ago. This is the fifth quarter in a row Xbox revenue has declined.
Xbox content & services revenue decreased two percent compared to the same quarter a year ago. This is slightly better than the forecast, which expected a decline in the mid single digits percent (-4% to -6%). This was "driven by declines in third-party content and Xbox Game Pass, partially offset by growth in first-party content."
Xbox hardware revenue dropped 14 percent year-on-year. This is inline with the forecast, which was for a decline. Microsoft did increase the price of the Xbox Series X and S in the US on October 3, 2025, as well as worldwide on August 1, 2026.
Overall for the quarter, Microsoft reported for the quarter revenue was up 19 percent year-over-year to $92.3 billion, operating income increased 21 percent to $45.9 billion, and net income on a GAAP basis was up 32 percent to $36.6 billion.
"We remain focus on building great games and reaching players wherever they choose to play - across console, PC, mobile, and cloud," said Microsoft CEO Satya Nadella.
"Minecraft delivered a record quarter, reaching all-time highs in both engagement and revenue, while World of Warcraft had its largest beta in franchise history.
"We enter the holiday season with one of our strongest first and third-party lineups in years, including Modern Warfare 4, which launched last week to the best reviews for a Call of Duty game in more than a decade, and Grand Theft Auto VI, which is coming to Xbox next month."
Microsoft's forecast for the quarter ending December 31, 2026 expects Xbox content & services to grow in the mid to high single digits percent (4% to 9%) year-on-year "driven by the timing of content launches across both first and third party," said Microsoft CFO Amy Hood.
"With content launch patterns through the year we expect growth to be the strongest in the second quarter (October to December 2026) with some deceleration in Q3 and further moderation in Q4." Xbox hardware is expected to decline year-over-year.
Xbox CEO Asha Sharma stated, "In Q1, XBOX revenue declined 2% YoY, compared with a 10% decline a quarter ago, while our accountability margin improved. Minecraft and WoW Forever set records, Call of Duty had its most acclaimed release in more than a decade, and our PC platform revenue grew double digits.
"Console sales remain constrained by supply, with more demand than consoles available. We’re working to get more consoles into players’ hands, including through our expanded refurbishment program. We’re making progress, with a lot more work ahead."
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can follow the author on Bluesky.
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Asha was able to improve the accountability margin for Xbox this quarter. All she had to do was fire over 1000 employees and either close or spin off studios. So brave..
While I appreciated it that some years ago Microsoft came up with the accountability margin, since it's an additional metric, it still is a metric that's not standard and was created by Microsoft/Xbox themselves.
And it's just a margin.
A margin represents the relation of two (or more) items to eachother. But it still doesn't speak any numerical raw data.
Which is to say that even if the accountability margin saw an increase, that the numerical data that it relates to can still be a negative. And Xbox use a lot of margins in their reports.
So in other words: their margin reporting still doesn't indicate anything about Xbox' true health status.
Xbox continues cratering.
Approaching pre ABK buyout levels.
xbox is doing bad... ya dont say,,, i hear that segas hardware is also doing bad
Oh, the layoffs helped SO MUCH.
I've updated the article with comments from Microsoft CEO Satya Nadella and the forecast for the next quarter. Xbox content & services is expected to grow in the high single digits percent (4% to 9%) year-on-year.
Best of luck with their turnaround. Hopefully this is the bottom and it is all upwards from here.
How in the world do you basically have a plain quarter with GoW, the best CoD in a decade and GTA VI?
Console units must be apocalyptic this quarter taking in mind that they raised the prices 50%. -35% units easy.
I always wondered why Asus etc bothered with the brand.
It was fueled by flaming dump trucks of Microsoft money.
2% drop is technically better than 3 most recent quarters: -10% for June 2026, -7% for March 2026, and -9% for Dec 2025. Still not great, but hopefully this means the declines will stop soon.
It's not better than YoY. Comparing a sequential quarter to make this one look not as bad is just a bad faith remark.
the power of using percentage, people use em to hide the truth
microslop nurtures a fanbase full of delusional and incompetent people
Compared to last year's Q1, Series consoles saw a substantial price increase beginning in October, 2025.
Yet higher console prices still led to declining hardware revenue in this year's Q1, since hardware revenue fell -14% year-on-year. This could only mean to have been quite a rough decline in units compared to last year's Q1.
Too bad it's just another Q report without any more detailed numbers other than some revenue data.
But I gotta say it still is a bit inconceivable to me how Xbox can pull off a $5.3bn quarter, which averages $1.79bn per month, with these hardware sales and even software sales.
GP really must be their saviour, at least in terms of monthly revenue coming in.
Game Pass was down too.
That is true.
But looking at their hardware revenue and even occassional software sales reports, GP must be carrying a lot of their quartely revenue.
Shocked
