Xbox hardware sales plunged 32% while gaming revenue dropped 9% year-over-year
Microsoft released its financial report for Q2 FY26, revealing declining performance across all key areas of its gaming division. Xbox showed particularly negative dynamics in content and services compared to the same period last year.
All figures compared to Q2 of the previous year:
Xbox content and services revenue fell 5%
Console sales declined 32%
Overall gaming division revenue decreased 9%
Microsoft CFO Amy Hood noted the results came in "below expectations, driven by first-party content with impact across the platform." Analysts attribute the decline primarily to weaker sales of Call of Duty: Black Ops 7 compared to last year's Black Ops 6, which delivered record-breaking results. This happened despite porting games to PS5, where they're showing strong sales. Microsoft CEO Satya Nadella only highlighted record PC player numbers and streaming hours on the Xbox platform during the financial webcast.
Outlook for Q3 FY26 doesn't promise improvement. Amy Hood expects continued decline compared to last year's results, though Xbox Game Pass growth will partially offset the overall drop. The company forecasts console sales will keep declining year-over-year.
Current performance aligns with guidance Microsoft leadership provided three months ago during Q1 results. Back then, the company warned of possible decline in the 4-9% range for overall metrics and 4-6% for content and services segment.
