Xbox expected to vaguely 'return to growth' this year in FY27

Q: What specific FY27 metrics is Microsoft using to define Xbox 'return to growth'?

The article says Microsoft is defining a FY27 "return to growth" for Xbox not by a single topline number but by a conjunction of metrics: the ability to adequately deliver new content, expansion of users through all methods (not just console access), new platform/monetization implementations such as watching advertisements to play free games, and growth from transmedia projects like Fallout season 3 and other film and TV efforts. The piece also frames this against FY26 declines (a $1.7 billion revenue loss and decade-low console hardware revenue) and continued cost cuts including further layoffs.

Q: Which Xbox business areas (hardware, first-party content, Game Pass, ads, transmedia) does the article say will drive FY27 growth?

The article says growth in FY27 will be driven by exclusive/first-party content, advertising (including watching ads to play free games), and transmedia projects such as Fallout season 3. It does not state that hardware or Game Pass specifically will drive FY27 growth.

Q: How might Grand Theft Auto VI's FY27 release impact Xbox revenue and user expansion according to the article?

The article says Rockstar Games' Grand Theft Auto VI releasing in FY27 will "undoubtedly help boost Xbox, and the games industry in general," suggesting it should lift Xbox revenue during that fiscal year. It also notes Microsoft is measuring success by expansion of users through all methods, not just console access, so GTA VI could drive broader user growth across Xbox's platforms and services.

Q: What transmedia projects does the article identify as contributing to Xbox’s FY27 strategy?

The article identifies transmedia content such as Fallout season 3 and other films and TV projects in development as contributing to Xbox’s FY27 strategy. Related coverage notes Microsoft is working on more than a dozen TV shows and films in development (Related 1 , Xbox has more than a dozen TV shows and films in development).

Microsoft CEO Satya Nadella says that Xbox is expected to return to growth in FY27, driven by cost-reducing layoffs, exclusive games, and expansion.

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Derek Strickland

Senior Gaming Editor

Published Jul 30, 2026 12:31 PM CDT

1 minute & 15 seconds read time

TL;DR: Microsoft expects Xbox to "return to growth" in FY27 after mass layoffs, project cancellations, and studio divestments aimed at cutting costs. FY26 saw a $1.7 billion revenue decline and record-low hardware sales. FY27 plans include more layoffs, new content releases (notably GTA VI), ad-supported free play, and transmedia expansion.

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Microsoft CEO Satya Nadella says that Xbox is expected to "return to growth" in FY27, but what does that actually mean?

Xbox expected to vaguely 'return to growth' this year in FY27 1

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Microsoft has pulled all the levers to ensure Xbox has a clear runway for growth. The group has held mass layoffs (Xbox let go of over 1,600 people in FY26 alone), cancelled projects, and divested studios, all while laying out new targets to help measure and quantify this so-called growth.

These drastic calls are expected to start paying off this fiscal year, company CEO Satya Nadella says: "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. 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."

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

Xbox expected to vaguely 'return to growth' this year in FY27 3

FY26 was another year of decline at Xbox, with the division losing $1.7 billion in annual revenues. FY26 also saw the lowest full-year Xbox console hardware revenues in the last 10+ years.

Given these dramatic drops, more context is needed here to properly understand Nadella's comments.

FY27 will see another round of layoffs at Xbox, with 1,600 more people being let go across all divisions. That means Xbox will shrink, again. One of the new growth measurements that Xbox has identified is being able to adequately deliver new content, which is of course jeopardized as you shed developers.

Another point: FY27 will also see the release of the most anticipated third-party game in the last 10 years with Rockstar Games' Grand Theft Auto VI. That will undoubtedly help boost Xbox, and the games industry in general.

FY27 will also see new implementations of Xbox strategies, including being able to watch advertisements in order to play free games.

Then there's transmedia content, including Fallout season 3, as well as other films and TV projects that are in development.

Frequently Asked Questions

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Question #1

What specific FY27 metrics is Microsoft using to define Xbox 'return to growth'?

Question #2

Which Xbox business areas (hardware, first-party content, Game Pass, ads, transmedia) does the article say will drive FY27 growth?

Question #3

How might Grand Theft Auto VI's FY27 release impact Xbox revenue and user expansion according to the article?

Question #4

What transmedia projects does the article identify as contributing to Xbox’s FY27 strategy?

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So for Microsoft, it's not just raw topline growth that will determine Xbox's success--it's a conjunction of metrics that includes expansion of users through all methods, not just console access.