Microsoft CEO Says XBOX Will Return to Growth in FY2027

Microsoft expects XBOX to return to growth in fiscal year 2027, despite falling gaming revenue and major changes across the division.

The company’s latest FY26 Q4 earnings report showed that XBOX content and services revenue declined 10% year over year. XBOX hardware revenue also fell 13% during the quarter, while full-year gaming revenue decreased 5%.

Microsoft’s broader business continued to expand. The company reported a 31.34% year-over-year increase in overall revenue, which reached $133.75 billion.

Microsoft is resetting the XBOX business

Microsoft CEO Satya Nadella discussed the gaming division’s overhaul during the company’s FY26 Q4 earnings call.

Nadella said Microsoft is making difficult but necessary decisions across XBOX’s content portfolio, platform, and operations. The company intends to reset the business and create a stronger foundation for long-term growth.

The reset follows several years of acquisitions, internal restructuring, changing platform priorities, and weaker hardware performance.

Nadella expects XBOX growth in FY2027

Despite the recent financial decline, Nadella expressed confidence in XBOX’s long-term prospects.

He highlighted the company’s collection of gaming intellectual properties, its global development studios, and the employees who remain after XBOX reportedly cut 3,200 jobs.

Nadella believes Microsoft can bring these assets together more effectively and improve how XBOX develops, distributes, and monetizes its games.

Microsoft now expects the gaming division to return to growth during fiscal year 2027.

XBOX leadership is changing its strategy

Microsoft formally announced the XBOX reset on July 6. XBOX CEO Asha Sharma reportedly described the state of the business as unhealthy, highlighting the need for major operational and strategic changes.

The overhaul is expected to affect XBOX’s content strategy, platform direction, studio structure, and internal operations.

Microsoft has not yet detailed every part of the new strategy. However, Nadella’s comments suggest that the company plans to focus more closely on sustainable growth, stronger use of its gaming franchises, and improved coordination between its studios and platforms.

XBOX faces another difficult fiscal year, but Microsoft’s leadership believes the reset can help the division stabilize and begin growing again in FY2027.

Via Insider Gaming