Link to the VGChartz article here.

Xbox Revenue Declines 2% in September 2026 Quarter, Hardware Revenue Falls 14%

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.

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."

Hard to judge if any adjustments are needed based on how little information Microsoft provides, but right now here are our quarterly estimates:

• Sep 2025 Q - 481K
• Sep 2026 Q - 350K

That is a 27% drop in units year-on-year. However, the Xbox Series X and S is more expensive than a year ago. So the units sold having a bigger drop than revenue makes sense. 

In the US, the average selling price for Xbox was up 33% year-on-year in September, while August is likely similar with the price increase happening on August 1. How much it would be up in July would be a lot lower. Then you take into account the price increase was different in other parts of the world. Likely talking a 20%-25% increase in the average selling price compared to the same quarter a year ago.

As far as the continued Xbox declines. They do seem to be improving, even if numbers are still down. The 3 previous 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.

I'm not a businessperson, to put it mildly.
But raising prices (like Xbox hardware and Game Pass) is not a solid solution to raise revenue. Raising prices is largely to increase profits or at the very least mitigate revenue drops.

As a non-business person: I feel like a better approach would be something akin to the "razor-and-blade model", i.e., you sell the blade for cheap to get the consumer hooked but recouperate lost potential revenue via overcharging the blade. Growing the Xbox ecosystem and then squeezing the consumers is much more profitable, I'd imagine, than setting up a brick wall that most consumers cannot afford to overcome.

(Or, IDK, maybe aim to make smaller budget releases and with great frequency at a normal price point? I feel like that would work wonders in generating profit without being a bit of a scam on the consumer.)

Components keep on increasing due to AI, forcing p4ice increases.

Well content wise, the quarter was a bit of an anomaly of sorts and would have been down more than 2% had they not re-released Black Ops 2 on Playstation which apparently generated 325M for them in July alone. 

Azure is a fucking abomination, it just prints money for MS...

Xbox is dead.

"Console sales remain constrained by supply, with more demand than consoles available. We’re working to get more..."

They are not hard to find. This is not the PS5 Pro. They are everywhere. She is saying that the record low sales are due to console supply. No don't get me wrong i am fluent in MicroPR speak and I am sure that there is a supply contraint, but thats not causing the poor sales. Sales are so low they could probably never ship another unit an still be fully stocked on the shelves for the foreseeable future. 

Somehow that hardware number just keeps managing to go down, down, and down with every report.
You'd think it'd hit some kind of bottom eventually, but apparently not.

It feels like hardware drops every time they report numbers.
I cant even remember the last time they reported % increase in hardware.
And that is after increased prices in hardware, while the reporting numbers are not unit numbers, but hardware revenue.