Microsoft has announced its latest earnings results for its fiscal first quarter of 2026, and things aren’t looking good for its gaming hardware revenue, specifically Xbox console sales.
As reported by The Hollywood Reporter, Xbox console sales were down 29 per cent, likely due to the summer quarter – July to September 2025 – being sandwiched between two Xbox console price hikes in May and October. This continues in the downward trend seen in Q4 2025, which saw Xbox console sales figures drop 22 per cent.
On the flip side, revenue from Xbox content and services, which includes Xbox’s Game Pass subscription service and sales of its first-party video games, grew by one per cent at US$5.5 billion for the quarter. This wasn’t enough to offset the console revenue drop, however, and Microsoft’s total gaming revenue saw a dip of US$113 million in the quarter, around two per cent.
“Xbox hardware revenue decreased 29% driven by lower volume of consoles sold,” read a statement by Microsoft, “Xbox content and services revenue increased 1% on a strong prior year comparable with growth in Xbox Game Pass and third-party content, offset in part by a decline in first-party content.”
It’s worth noting that Game Pass also saw yet another significant price hike, but this happened to occur immediately after Q1 2026 closed, so it remains to be seen how this will affect revenue from Xbox content and services in Q2. Conversely, the current quarter has seen the launch of the ROG Xbox Ally and ROG Xbox Ally X handheld consoles, which will definitely help boost overall gaming hardware sales by the end of the quarter.
Kevin is a reformed PC Master Race gamer with a penchant for franchise “duds” like Darksiders III and Dead Space 3. He has made it his life-long mission to play every single major game release – lest his wallet dies trying.
