Wednesday, January 28th 2026
Xbox Hardware Sales Plunge 32% YoY as Services Keep Gaming Division Afloat
Microsoft just reported its Q4 2025 results, providing some interesting insights into its gaming ventures. The company's overall quarterly revenue increased by an impressive 17% compared to the same period last year, reaching $81.3 billion. This growth is primarily driven by the strong performance of the cloud sector. However, Microsoft's gaming divisions are experiencing challenges with declining revenue. In its Xbox unit, hardware revenue decreased by 32% year-over-year, significantly impacting the business. The overall Xbox division saw a 9% decline, while Xbox content and services dropped by 5%. The services section, which includes the Game Pass subscription, is the only area not experiencing a steep decline. By recently rising Game Pass subscription prices, Microsoft aims to offset some of the hardware losses.
An interesting detail from the earnings report is the Windows OEM and Devices sector, which reported a modest growth of 1%. This is minor considering the Windows 10 end-of-life, which was expected to boost this sector significantly. Windows itself reported a 5% growth, but this is only a slight increase compared to what Microsoft anticipated from OEMs purchasing Windows license keys for Windows 11, as well as a major consumer upgrade spree to Windows 11 devices. With Xbox revenue declining significantly year-over-year for several years, it is becoming less of a priority for the company, which now derives substantial revenue from Microsoft Azure and 365 Commercial subscriptions.
The Productivity and Business Processes sector—which includes Microsoft 365 offerings like Word, Excel, and PowerPoint—recorded revenue of $34.1 billion, an increase of 16%, providing a healthy income for Microsoft. The Intelligent Cloud division, supported by Microsoft Azure cloud services, recorded $32.9 billion in revenue, marking a 29% increase year-over-year.
Sources:
via The Verge, Microsoft
An interesting detail from the earnings report is the Windows OEM and Devices sector, which reported a modest growth of 1%. This is minor considering the Windows 10 end-of-life, which was expected to boost this sector significantly. Windows itself reported a 5% growth, but this is only a slight increase compared to what Microsoft anticipated from OEMs purchasing Windows license keys for Windows 11, as well as a major consumer upgrade spree to Windows 11 devices. With Xbox revenue declining significantly year-over-year for several years, it is becoming less of a priority for the company, which now derives substantial revenue from Microsoft Azure and 365 Commercial subscriptions.
14 Comments on Xbox Hardware Sales Plunge 32% YoY as Services Keep Gaming Division Afloat
MS got to a good position with the Xbox360, but it’s been all downhill ever since.
I still maintain the 360 was a fluke. Had Sony not botched the PS3 launch and development with that absurd CELL processor design, had they launched at $399 like xbox, MS never would have done that well. And they still technically lost that generation too, the PS3 squeaked out more sales and the Wii dominated both of them. The 360 was held up entirely by Gears of war, Halo 3 and Reach, and Forza. Once Sony stopped biffing releases and eating shit for no reason, they began beating MS.
Upping the base (512GB) Series S's price to $400 killed the value of one of the best things the new Xbox lineup had going for it; a fast, compact, budget console with reasonable framerates and modern graphics. Then the whole up-pricing GP thing and it all fell apart. Really sad to see where Xbox is today, as a rather devoted Xbox fan.
Microsoft windows Phone vibes incoming. Let it die, please.
CoD will continue to be undermined not just by gamepass but MS' inability to make good games.Yeah....that's why I listed them. Once they stopped pumping out good games their console sales declined, and once what they did make went multi platform hardware sales cratered.
The Xbone was let down by software. Its still the second best selling xbox console at 58 million units. Had it had more games like halo 3 and less like halo 5, it likely would have done better.
- Don’t even know how to name their devices
- Introduce stuff no one asked for and no one wants ("TV XBOX", Kinect etc)
- Inject money into games, and they turn into an expensive piece of garbage
- Buy out promising studios and kill them (8 if I'm not mistaken)
- Buy out studios for a zillion dollars, but can’t keep Game Pass cheap
- Keep hitting the same nails in game development, forgetting what fans want
- Stop making exclusives, making the competition’s hardware look more interesting by default
- Software developers since creation, still can’t create a half-decent gaming store on PC
- Have the go-to gaming platform on PC, but the OS is losing gaming performance by the day
...Also part of the reason is MS couldn't win over other territories with the brand, Japan forget it and they had paid Japanese devs to support the thing hard, but the Japan market don't like Xbox and EU was always a struggle.