Xbox revenue plummets — and Microsoft’s own first‑party lineup is the culprit, raising tough questions about the platform’s content strategy in 2026

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Xbox’s recent financial results for the second quarter of fiscal year 2026 show a decline in revenue, and Microsoft is acknowledging the issue isn’t due to hardware sales, subscriptions, or broader economic factors. Instead, the company says its own game releases weren’t strong enough to drive growth this quarter – a candid admission about the lack of compelling content. This situation is prompting a closer look at Xbox’s future plans, particularly as exclusive games become increasingly important for attracting and retaining players. The fact that Microsoft highlighted ‘record PC players in paid streaming’ as a positive note suggests they are struggling to find significant wins, and this detail was even difficult to discern during the earnings call.

  • Gaming revenue decreased 9%
  • Xbox hardware revenue dropped -32%
  •  Xbox content and services revenue down 5%

Some people believe recent changes to Game Pass are causing revenue declines, but Microsoft’s CFO, Amy Hood, stated during a recent webcast that they actually expect Game Pass revenue to *increase* in the next quarter. If that happens, it would be surprising to think Game Pass is responsible for the current revenue drops.

Amy Hood also stated that Xbox hardware sales are predicted to decrease again in the third quarter. They’re hoping growth in Game Pass subscriptions will balance out this decline. However, the Xbox brand as a whole is currently struggling, and sales are likely to continue falling.

Amy Hood attributed the decrease in gaming revenue to the performance of games made directly by the company. She explained that revenue was “below expectations” due to these first-party titles, impacting the entire platform. This downturn occurred in the second quarter of the fiscal year, covering October 1st to December 31st, 2025. During this period, four games were released: Ninja Gaiden 4, Keeper, Outer Worlds 2, and Call of Duty: Black Ops 7.

Looking at the last quarter’s numbers, I was surprised to see Ninja Gaiden and Keeper driving so much of the revenue. Honestly, Microsoft and Xbox were clearly counting on Call of Duty to be the big performer. But with the recent drop in Black Ops 7 sales, the overall revenue decline isn’t much of a surprise. It really highlights how reliant they were on that one franchise.

Despite being released later in the year, Call of Duty usually tops the charts in gaming. However, this year’s installment, Black Ops 7, came in behind four other popular titles: Monster Hunter Wilds, Borderlands 4, NBA 2K26, and Battlefield 6.

What will it take to stop the slide?

Xbox is changing course significantly from its previous strategies. One major shift – stopping the release of games only available on Xbox – has removed a key reason for many gamers to choose an Xbox console.

The console is now more expensive than ever before, due to continuing tariffs and the rising cost of older parts. Compared to its competitors, Microsoft’s console is the most expensive to buy: the Series S costs $399, the same as the PlayStation 5 Digital Edition, but offers significantly less performance for the price.

To make matters worse, Xbox recently increased the price of what was already the best value in gaming by a huge 50%, despite the current economic challenges. Now, the big question is: how will Xbox, or Microsoft, fix this situation and regain player trust?

Things don’t look good right now, and I don’t see a clear solution. It feels like they’ve upset a lot of long-time Xbox fans without offering them anything new. While making games available to more people is positive, it doesn’t justify buying a console that seems determined to discourage purchases.

With more people using Xbox Play Anywhere, the next Xbox console – which is expected to run like Windows and work with Steam – could be a success. However, if it costs as much as the rumored Steam machine or a comparable gaming PC (especially with current memory prices), many gamers will likely continue to choose those options instead of a new Xbox.

I’ve spent a lot of time gaming – I’m nearing 500,000 gamerscore – and I’ve mostly switched to playing on a Windows PC. So, the idea of an Xbox that works with Steam is appealing. But will this new Xbox actually improve things for the platform? Beyond this new device and the games being released on Xbox and other platforms, are there any other exciting developments we can expect?

Maybe I’m being too critical, but having seen Xbox go from a huge success with the 360, to a failure with the One, then a comeback with Game Pass, and now… this, it’s hard not to be disappointed with Microsoft’s recent choices. It feels like a lot of us predicted these outcomes.

This past quarter really highlights how crucial consistently releasing strong, exclusive games is for Xbox’s success. While Game Pass, cloud gaming, and PC gaming are all growing, they can’t fully compensate when there aren’t many new, big titles. Microsoft’s game studios are now under pressure to show that their content plan will recover and that this recent slowdown is just a temporary setback, not a sign of things to come. Hopefully, that’s the case.

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2026-01-29 05:10