Xbox console sales continue to decline

Xbox sales have been on the decline for a while now – and the story doesn’t get any brighter. Microsoft just released its earnings for the first quarter of 2026 and Xbox revenue was down 29 percent year over year. last quarterdecreased by 22 percent. Down 29 percent in the first two quarters of 2025, down 42 percent Q4 The year 2024… you get the picture.

As tariffs and inflation took their toll, Microsoft did just that Prices rose dramatically On its gaming consoles, the Series Microsoft’s response was to downplay the console’s importance and continue “Xbox everywhere“Strategy. This has had some success on the content and services front, although revenue was largely flat in the quarter, growing just one percent year over year.

Clearly, Microsoft would like to see more growth there. The company was reportedly seeking a dramatic investigation 30 percent profit margin There, leading to Layoffs and Canceled projects. But the company’s outlook for the second quarter is no rosier. It expects Xbox hardware revenue to continue to decline, and for content and services to continue to grow in the low single digits.

Microsoft has seen growth in Windows OEM and hardware, with a modest 6 percent increase in revenue year over year. The company has stopped reporting Surface earnings separately, so it’s unclear how these devices will perform. They have been in steady decline for several years.

It is Azure and cloud services that remain the driving force behind Microsoft services rise. The growth of its intelligent cloud services is significant. Revenue increased 28 percent year over year to $30.9 billion, with Azure specifically growing 40 percent.

More broadly, Microsoft Cloud revenue was $49.1 billion, up 26 percent from the first quarter of 2025. The company’s cloud and Azure divisions have been growing steadily for several years now.

In total, Microsoft reported revenue of $77.7 billion for the quarter, up 18 percent from the same period last year. Its net income reached $27.7 billion, an increase of 12 percent. While these increases are largely driven by the company’s diverse cloud offerings, its productivity and business operations still represent a significant portion of its income ($33 billion).

Update, October 29: This article has been updated with details from Microsoft’s earnings call. The headline has also been updated to indicate declining hardware sales.