Xbox Sales Continue To Tank

Xbox income person been tanking for a while now — and nan communicative hasn’t gotten immoderate brighter. Microsoft conscionable released its Q1 2026 net and Xbox hardware gross was down 29 percent year-over-year. Last quarter, it was down 22 percent. Down 29 percent successful nan first 2 quarters of 2025, down 42 percent successful Q4 of 2024… You get nan picture. 

As tariffs and ostentation return their toll, Microsoft has dramatically accrued nan prices connected its gaming hardware, pinch nan Series X now starting astatine $599.99. Microsoft’s consequence has been to deemphasize nan console and prosecute an “Xbox everywhere” strategy. That has yielded immoderate occurrence connected nan contented and services front, though gross location was mostly level this quarter, only increasing 1 percent twelvemonth complete year.

However, Microsoft would evidently for illustration to spot much maturation there. The institution has reportedly been pursuing melodramatic 30 percent profit margins there, starring to layoffs and cancelled projects.

Microsoft did spot hardware maturation from Windows OEM and Devices, pinch gross expanding a humble 6 percent twelvemonth complete year. The institution stopped reporting Surface net separately, truthful it’s unclear really those devices are performing. They had been connected a dependable diminution for respective years.

It’s Azure and unreality services that stay nan driving unit down Microsoft’s ascent. The maturation of its intelligent unreality services is substantial. Revenue accrued 28 percent twelvemonth complete twelvemonth to $30.9 billion, pinch Azure specifically increasing 40 percent. 

More broadly, Microsoft Cloud gross was $49.1 billion, an summation of 26 percent from Q1 2025. The company’s unreality divisions and Azure person been increasing steadily for respective years now. 

In total, Microsoft reported $77.7 cardinal successful gross for nan quarter, up 18 percent from nan aforesaid clip past year. And its nett income was $27.7 billion, up 12 percent. While those increases are mostly driven by nan company’s various unreality offerings, its productivity and business processes still relationship for a important information of its income ($33 billion).