Xbox console sales drop to lowest point in a decade as division loses $1.7 billion in FY26

Q: What were the main factors Microsoft attributed to the $1.7 billion year-over-year decrease in Xbox revenue?

Microsoft said the $1.7 billion, or 7%, decline was driven by declines in Xbox content and services and Xbox hardware. Content and services revenue fell about 5% versus a prior-year comparable that benefited from strong first-party content, partially offset by Xbox Game Pass growth, while hardware revenue dropped 29% due to lower console volumes sold. Division profits were also hit by impairment charges from cancelled projects and severance costs related to recent layoffs.

Q: How does FY26 Xbox hardware revenue compare to the previous decade’s low in FY20?

FY26 Xbox hardware revenue was about $1.51 billion versus $1.66 billion in FY20, a decline of roughly $150 million. This makes FY26 the lowest annual Xbox hardware revenue in more than a decade.

Q: How did Xbox content and services revenue perform in FY26 and what offset factors does Microsoft mention?

Xbox content and services revenue decreased 5% year-over-year in FY26, contributing to an overall $1.7 billion (7%) decline in Xbox revenue. Microsoft said the prior-year comparable had benefited from strong first-party content performance, and the decline was offset in part by growth in Xbox Game Pass, according to its 10K report.

Q: What impairment charges and one-time costs affected Xbox division profits in FY26?

Division profits were affected by impairment charges from cancelled projects and severance costs tied to the 1,600 layoffs across Xbox studios. These one-time charges and severance packages contributed to the FY26 profit decline.

Xbox revenues were down $1.7 billion from last year, driven by higher expenses and impairments and hefty drops in Xbox Series console hardware sales.

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Derek Strickland

Senior Gaming Editor

Published Jul 30, 2026 9:42 AM CDT

1-minute read time

TL;DR: Xbox revenue fell about $1.7 billion (7%) in FY26 to an estimated $21.76B, driven by a 29% drop in hardware revenue and lower content and services. Xbox Series hardware earned an estimated $1.51B-its weakest year in over a decade-while impairments, severance, and higher costs hurt profits.

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Xbox earnings were down -7% year-over-year, representing a decrease of around $1.7 billion as the Xbox Series records its worst sales revenue of the generation.

Xbox console sales drop to lowest point in a decade as division loses $1.7 billion in FY26 3

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Microsoft has reportedly its full-year revenues, showing sharp declines in Xbox earnings. Based on company data, Xbox made an estimated $21.76 billion in FY26, compared to $23.45 billion the previous year. Increased costs and a topline revenue reduction were the major culprits.

According to our estimates, FY26 wasn't just the lowest annual earnings for the gen 9 Xbox Series console generation. FY26 represents the lowest year of Xbox console revenues in more than a decade. The last all-time yearly low for Xbox hardware sales was in FY20 with $1.66 billion earned, and in FY26, Microsoft made an estimated $1.51 billion from Xbox Series sales.

Read more: Xbox earnings down -$380 million in latest quarterly decline

Xbox console sales drop to lowest point in a decade as division loses $1.7 billion in FY26 4

"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," Microsoft said in its 10K report.

Division profits were also impacted by things like impairment charges from cancelled projects and severance packages from the 1,600 layoffs that Xbox recently conducted from across its studios.

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Question #1

What were the main factors Microsoft attributed to the $1.7 billion year-over-year decrease in Xbox revenue?

Question #2

How does FY26 Xbox hardware revenue compare to the previous decade’s low in FY20?

Question #3

How did Xbox content and services revenue perform in FY26 and what offset factors does Microsoft mention?

Question #4

What impairment charges and one-time costs affected Xbox division profits in FY26?

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Microsoft is currently working on its next-gen Project Helix console, which is believed to play both Xbox console and Windows PC games on the same device.