XBOX Content Revenue Drops 10% as Microsoft Restructures

Microsoft reported another difficult quarter for XBOX, with gaming revenue declining across content, services, and hardware despite stronger results elsewhere in the company.

According to Microsoft’s FY26 Q4 earnings release, XBOX content and services revenue fell 10% year over year during the latest quarter. Hardware revenue also declined 13%.

The hardware drop came despite an XBOX Series X and Series S sales rebound in June, when console sales reportedly increased 86% compared with the previous month.

For the full fiscal year, total XBOX revenue declined 5% compared with the previous year.

Microsoft Reports Stronger Companywide Growth

XBOX’s decline contrasted with Microsoft’s broader financial performance. The company reported total revenue of $133.75 billion, representing a 31.34% year-over-year increase.

Microsoft also ended the fiscal year with AI revenue up 27%. The company recorded a $3.2 billion gain linked to its investment in Anthropic, the developer of the Claude AI models.

These results show that cloud computing and artificial intelligence continue to support Microsoft’s growth while its gaming division faces weaker sales and substantial internal changes.

XBOX Restructuring Continues

Microsoft has started a major XBOX restructuring as concerns grow about the gaming business’s performance and long-term direction.

The reset reportedly includes 3,200 layoffs, studio changes, and leadership restructuring. Microsoft has also changed its studio portfolio as it attempts to reduce costs and reorganize its gaming operations.

Double Fine reportedly laid off 23 employees after splitting from XBOX and becoming independent again.

Microsoft also reported lower-than-expected expenses connected to its Voluntary Retirement Program. However, severance costs and impairment charges associated with XBOX partly offset those savings.

The latest financial results place additional pressure on Microsoft to stabilize XBOX revenue while managing layoffs, leadership changes, and a shifting studio strategy.

Via Insider Gaming