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It was one other not-great quarter for Xbox, and that is in all probability not nice information for a division of Microsoft that within the minds of many observers is already up in opposition to the wall. But CEO Asha Sharma is having none of that defeatist speak, saying after the corporate posted its outcome that she expects Xbox to return to progress by the tip of the 2027 fiscal yr.
Xbox content material and companies income for the corporate’s fourth quarter had been down 10% in comparison with the earlier yr, whereas working bills elevated by 8%, which chief monetary officer Amy Hood mentioned in an earnings call was pushed by investments in R&D and impairment prices. Operating earnings decreased 14%, and working margins had been down by 21%.
The full yr image painted in Microsoft’s annual Form 10-K SEC filing is not any prettier: “Xbox revenue decreased $1.7 billion or 7% driven by declines in Xbox content and services and Xbox hardware. Xbox content and services revenue decreased 5% on a prior year comparable that benefited from strong first-party content performance, offset in part by growth in Xbox Game Pass. Xbox hardware revenue decreased 29% driven by lower volume of consoles sold.”
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So, merely put, recreation gross sales are down, console gross sales are down, and that is not splendid. Coupled with large layoffs over the previous two years which have left quite a few studios gutted or gone, a giant shakeup on the prime, and a technique that may’t readily be discerned from the skin (past ‘slash-and-burn’), and it appears to be like particularly bleak in case your outlook on the way forward for Xbox is already less-than-optimistic.
Sharma, nevertheless, says higher instances are coming. “In FY26, over 200 million new players came to Xbox and our games, but our business did not grow with our audience,” she wrote on X. “We need to close that gap by investing in what players value. That will take time, but we expect to return to growth by the end of FY27.”
Microsoft’s 2027 fiscal year ends on June 30, 2027—just shy of a year from now. What exactly will be done between now and then to encourage that “return to growth” is anybody’s guess, but based on what we’ve seen over the company’s past two fiscal years I wouldn’t be surprised to see more cuts and closures between now and then.
Microsoft CEO Satya Nadella also predicted better things for 2027. “When it comes to Xbox, we are making the necessary decisions required across our content portfolio, platform, and operations to reset the business for long-term growth,” he said during the earnings call. “We have the best IP in the industry, and talented studios around the world, and believe we can bring these strengths together and expect to return the business to growth in fiscal 2027.”
While Xbox was down, you don’t need to shed any tears of worry for Microsoft. Overall the company took in nearly $332 billion in revenues in its 2026 fiscal, an 18% increase over the previous year, and operating income of more than $155 billion.
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