Xbox struggles continue as console sales fall 32% and first-party games underperform

[midian182]

In a nutshell: Things aren't getting better for Xbox. Microsoft's latest financial results reveal that the segment's hardware revenue fell 32% year-over-year, while the entire division experienced a 9% decline. The company blames the drop on lower Xbox console sales, as well as underperforming first-party games such as Call of Duty: Black Ops 7.

In its second-quarter results for financial year 2026, which ended December 31, 2025, Microsoft wrote that Gaming revenue decreased by $623 million to $5.99 billion, or 9%. The drop was driven by the 32% decline in Xbox hardware, as well as a small dip in Xbox content and services.

Microsoft specified that there was a 5% decline in content and services – the section that includes Game Pass subscriptions.

The segment is a contrast to Microsoft's overall results, which saw the Redmond giant's revenue increase by 17% compared to the same period last year as it hit $81.3 billion. Operating income, meanwhile, was up 21% to $38.3 billion.

Microsoft CFO Amy Hood said that Microsoft expects Game Pass revenue to grow while Xbox hardware falls again in Q3.

"[Gaming revenue was] Below expectations, driven by first-party content with impact across the platform," Hood said. The four first-party games released during the quarter were Ninja Gaiden 4, Keeper, The Outer Worlds 2, and Call of Duty: Black Ops 7.

It was reported in December that the latest CoD entry sold only 401,000 copies on Steam in its first 26 days – an 82 percent drop from Black Ops 6's 2.3 million sales over the same period the previous year. Moreover, the game's peak daily concurrent player numbers during its launch period were significantly lower than those of Black Ops 6 in 2024 and Modern Warfare 2 in 2022.

2025 was not a good year for the Xbox brand. The Xbox Series X and Series S continue to trail PlayStation 5 by a wide margin in global sales, while Microsoft's long-term pivot toward services has raised questions about the platform's hardware future.

High-profile studio closures, layoffs following the Activision Blizzard acquisition, and the mixed reception to recent first-party releases have further dented confidence in the Xbox brand among fans. People aren't even using the consoles to watch Pornhub anymore.

The Xbox results are part of Microsoft's More Personal Computing segment, which also includes Windows and Devices and Search and news advertising. The section as a whole saw its revenue drop 3% to $14.25 billion, while operating income decreased 3% to $3.8 billion.

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Xbox struggles continue as console sales fall 32% and first-party games underperform

 

[techstrike]

Make it open, allow to have SteamOS and all PC games of Steam ... and the XBOX will be a hit.
otherwise, let it fall.

 

[winjer]

Xbox hardware sales are almost dead.
No wonder they have been moving to being third party.

 

[Rapob]

What did people expect? Not even Microsoft bothers selling Xbox consoles anymore. Out of stock on Microsofts own page, pretty much always

"Next Gen Xbox" won't be hardware made by MS probably. They will outsource this. Handhelds, consoles, will be "Xbox certificed" probably...

Microsoft wants games to be Windows exclusive instead. Which is why they bought tons of big game studios and keeps buying more.

 

[Vulcanproject]

When you give no reasons to buy Xbox hardware over alternatives don't be surprised when people don't buy it.

I saw Horizon 6 and Fable launch on PS5 this year, Microsoft's best looking games for at least the last three years. Why miss out on Sony games and buy an Xbox if you can also get these on PC or PS5? No reason.

 

[torvuswalds]

Worth clarifying: the 32% decline cited here is hardware revenue, while Black Ops 7 impacts content & services. Combining them suggests causation that isn’t supported by the earnings breakdown.

 

[m4a4]

As I've said before, MS doesn't and hasn't cared for hardware sales for years now (beyond a convenient excuse for shareholders). I don't get how people still think their software-first approach hinges on a piece of hardware (when they have access to multiple platforms-worth of hardware to sell on).
Just look at their gaming division revenue; despite incredibly low hardware sales, they still have a healthy number.

Now, as for their recent launches being sub-par, that's on them for not managing their studios better. Nothing related to hardware. A bad game is a bad game on any platform.
But they aren't being an Ubisoft (yet) with how badly they've managed their studios lol

 

[texasrattler]

BO7 issue isnt that the game is bad, its not, its that it came after BO6 which wasn't all that good. So fans didnt care for another BO title.
But the game is constantly being played on consoles n is the 2nd most game played.

CoD is doing fine.

Another thing to note that is that CoD titles are on Xbox n pc pass. So you dont have to pay full price. This hurts n helps, depending on how you look at it.

Steam is pc only so whatever happens there isnt/doesn't mean everything. Arc Raiders is #1 Steam. Its new n popular. Course its being helped by a popular streamer which dont hurt.

 

[Axeia]

Remember when Sony was against Microsoft buying Activision-Blizzard?
imo if anything it worked in Sony's favor so far, BO7 is doing quite some brand damage.

 

[bviktor]

Remember folks, you don't have to have exclusives! At all!

 

[jbright]

The Call of Duty numbers are especially telling. This highlights the downside of the everything-is-a-service strategy. If hardware sales fall and first-party releases underperform at the same time, there’s nothing left to prop up the ecosystem except Game Pass growth, which suddenly feels like a single point of failure.

 

[texasrattler]

Remember when Sony was against Microsoft buying Activision-Blizzard?
imo if anything it worked in Sony's favor so far, BO7 is doing quite some brand damage.

No its not. Its in the top 5 games played in 2025. It didnt do great overall because of BO6. BO6 is a top 10 game played in 2025. BO6 was overhyped n sold well but was a let down to the players. BO7 is a better game but players weren't interested in another BO title.
Overall, CoD is doing quite well with 2 games in the 10 list of played games in 2025.

 

[amghwk]

I have the Series X. I find it a very good machine for playing and it's capable and super quiet.

I won't go into the Gamepass problems territory, though I'm subscribing to it.

Ironically I'm using Series X to play older games from original Xbox to Xbox360 era. One of the advantages of the Xbox platform compared to the PS.

 

[Axeia]

No its not. Its in the top 5 games played in 2025. It didnt do great overall because of BO6. BO6 is a top 10 game played in 2025. BO6 was overhyped n sold well but was a let down to the players. BO7 is a better game but players weren't interested in another BO title.
Overall, CoD is doing quite well with 2 games in the 10 list of played games in 2025.

Ah yes, doing great with a "mostly negative" score on steam from user reviews
(The only place I bother checking nowadays because the "critics" and professional reviewers just score based on what goodies or payment they receive).

The only YouTube coverage I've seen of it was extremely negative as well. That's brand damage now matter how you look at it. Coverage here on tech spot was about how it's underperforming as well. CoD is Activisions flagship product, having that fail is not great.
That's like Blizzard messing up WoW, although arguably they've been doing that for ages now.

 

[gamerk2]

Ah yes, doing great with a "mostly negative" score on steam from user reviews
(The only place I bother checking nowadays because the "critics" and professional refused just score based on what goodies or payment they receive).

The only YouTube coverage I've seen of it was extremely negative as well. That's brand damage now matter how you look at it. Coverage here on tech spot was about how it's underperforming as well. CoD is Activisions flagship product, having that fail is not great.
That's like Blizzard messing up WoW, although arguably they've been doing that for ages now.

The problem is CoD is frankly oversaturated at this point; we don't need nor want a game every single year. So the series starts to get stale, and looses appeal.

 

[texasrattler]

Ah yes, doing great with a "mostly negative" score on steam from user reviews
(The only place I bother checking nowadays because the "critics" and professional reviewers just score based on what goodies or payment they receive).

The only YouTube coverage I've seen of it was extremely negative as well. That's brand damage now matter how you look at it. Coverage here on tech spot was about how it's underperforming as well. CoD is Activisions flagship product, having that fail is not great.
That's like Blizzard messing up WoW, although arguably they've been doing that for ages now.

Sure reviews can be negative but do you think that stops players from playing cod or even buying cod. Hasn't so far. And its a top 5 game played. Reviews dont mean a whole lot. Especially when it comes to cod, people still play it and buy it.

Steam is pc only it doesn't nor will it ever show the whole picture of a game unless its only a pc game.

 

[vridamatekk]

Exclusives give a platform a soul.
MS should make Xbox a 50% Windows affair, they even own Windows themselves so win win.

Sony squirms & wants to talk about something else & hope it goes away when it comes to closed platform & walled garden.

 

[LimyG]

It's a powerful piece of kit - but it's too tied down. Open it up and let people use it to the full potential.

I doubt they care much about Console HW sales though. They do care about gaming through Windows, but the whole negativity surrounding MicroSlop probably puts people off too.

As the first comment said open it up to Steam. But nah, MS are incapable of doing anything that consumers really want.

EDIT: I really liked the 360, despite the red ring of death with earlier models. The games were good, and it was a good system for it's era.
I bought a lot of Xbox 360 disks, and thought they did a good job with the whole 360 experience. Had to buy two consoles though. The first one died RR of D. But I still thought it was worth paying for a another 360. That kind of positive feeling towards MS is unimanginable now.

MS don't do things lke the 360 or a proper OS like Win 7 anymore. Sad. They used to be a decent corp. Now the opposite in just about everyway. Even Sataya's laughable blogs.

 

[acrossthestars]

Does Microslop even want Xbox to succeed? Because, between the "moving all previously Xbox 360- and Xbox One-exclusive titles to other platforms" and "not releasing any new iterations of the hardware", it all reads as "we've given up." Hell, that's the goal of Gamepass: to make everything an Xbox. Don't need to spend R&D making new hardware, if everyone already has one. I mean, I guess the only benefit is the legacy titles and Xbox Achievements, like awards even matter anymore...

With that in mind, why even buy into the ecosystem at all?

 

[LimyG]

Does Microslop even want Xbox to succeed? Because, between the "moving all previously Xbox 360- and Xbox One-exclusive titles to other platforms" and "not releasing any new iterations of the hardware", it all reads as "we've given up." Hell, that's the goal of Gamepass: to make everything an Xbox. Don't need to spend R&D making new hardware, if everyone already has one. I mean, I guess the only benefit is the legacy titles and Xbox Achievements, like awards even matter anymore...

With that in mind, why even buy into the ecosystem at all?

Yeah, I think you are right.
Microslop would love to move it all over to game pass. Which requires Slopfest Windows.

Be good if they gave up on the abomintation that is W11 too.
Start from scratch with a decent secure fast basic OS that has the option to OPT IN, only, to all their other stuff. Absolutely won't happen that way though.

 

[acrossthestars]

Be good if they gave up on the abomintation that is W11 too.
Start from scratch with a decent secure fast basic OS that has the option to OPT IN, only, to all their other stuff. Absolutely won't happen that way though.

They literally cannot "start from scratch", because
A) that would take too much R&D and also be "not Windows" (which is what people want from them, minus the AI slop); most of the value of the OS comes from its 40-year-old history. If you throw away its legacy of licensed software support, you basically just have "Linux, by Microsoft"
B) they've already spent north of $80 billion on their partnership with OpenAI
C) they still have existing contracts they have to honor; otherwise they risk completely destroying their reputation, not just undermining their market dominance with bad financial decisions

Nadella has basically staked his entire CEO position on "services and AI" being the future of Microsoft. He's in too deep. If he backtracks on that vision, then that is an admission of defeat―even if such a reversal would serve to better the company, in the long run.

You can write off a couple hundred million here and there, as a series of bad financial decisions. Companies do that all the time. But, a contract worth tens or even hundreds of billions is a very different animal; that's the GDP of some entire nation states. A write off of that scale would absolutely crater their stock price and probably compel the board to fire Nadella.

 

[LimyG]

They literally cannot "start from scratch", because
A) that would take too much R&D and also be "not Windows" (which is what people want from them, minus the AI slop); most of the value of the OS comes from its 40-year-old history. If you throw away its legacy of licensed software support, you basically just have "Linux, by Microsoft"
B) they've already spent north of $80 billion on their partnership with OpenAI
C) they still have existing contracts they have to honor; otherwise they risk completely destroying their reputation, not just undermining their market dominance with bad financial decisions

Nadella has basically staked his entire CEO position on "services and AI" being the future of Microsoft. He's in too deep. If he backtracks on that vision, then that is an admission of defeat―even if such a reversal would serve to better the company, in the long run.

You can write off a couple hundred million here and there, as a series of bad financial decisions. Companies do that all the time. But, a contract worth tens or even hundreds of billions is a very different animal; that's the GDP of some entire nation states. A write off of that scale would absolutely crater their stock price and probably compel the board to fire Nadella.

Oh, yes, you are right. I did say,
"Absolutely won't happen that way though."

Still, it's my fault for not being clearer. That would only happen in an alternative universe.
I agree with everything you said.