Microsoft’s Xbox content and services revenue declined 2% year over year during the July-September quarter, extending a streak of four consecutive quarterly declines for the business. The results were included in Microsoft’s first-quarter fiscal 2027 earnings, released Oct. 28.
The category covers revenue from first- and third-party games, in-game purchases, the Xbox Game Pass subscription service, cloud gaming and advertising. Microsoft said the decline was 1% in constant currency, a measure that removes the effect of exchange-rate changes.
The decline narrowed from the previous quarter
Xbox content and services revenue fell 10% year over year in the April-June quarter. The latest result therefore represented an 8-percentage-point improvement in the rate of decline, although revenue remained below the level recorded during the same period a year earlier.
Console revenue continued to weaken. Xbox hardware revenue fell 14% year over year in the July-September period. Microsoft’s Devices and Consumer segment, which includes Xbox, reported total revenue of $15.5 billion, down 3% from the same quarter a year earlier.
- Xbox content and services revenue: down 2% year over year, or 1% in constant currency.
- Xbox hardware revenue: down 14% year over year.
- Devices and Consumer segment revenue: $15.5 billion, down 3% year over year.
Microsoft describes a broader gaming reset
Asha Sharma, who became Microsoft Gaming’s chief executive in February, is overseeing an effort focused on improving profitability and changing the structure of the gaming business. Microsoft has set a goal of returning Xbox to revenue growth in fiscal 2027.
The latest figures follow a difficult fiscal 2026. For the year ending in June, Xbox revenue fell 7% year over year, while hardware revenue dropped 29%. Microsoft and Sharma also denied reports that private-equity firms were considering acquiring Xbox and said the company remained focused on its own turnaround plans.
New releases and hardware are part of the plan
Microsoft said Xbox is pursuing a recovery in the second half of the fiscal year through major new game releases and preparations for next-generation hardware. Those plans sit alongside the company’s existing content and services business, which includes Game Pass, cloud gaming and advertising as well as game sales and in-game content.
The quarterly figures measure Microsoft’s fiscal first quarter, not the first three months of the calendar year. The July-September period ended with Xbox content and services still in negative year-over-year territory, even as the rate of decline improved substantially from the prior quarter.
