Xbox hardware sales slump by 32% as Microsoft reports that its overall gaming revenue is in decline

As Andy already reported, Microsoft has just announced bumper revenues of over $80 billion for the most recent quarter. But not every division within the tech titan is coining it. Its Xbox hardware revenue continues to fall and even its overall gaming services revenues are on the slide.

Xbox hardware revenues are reportedly down by 32% in the final quarter of 2025, while overall gaming revenue was down 9%. Microsoft also says in its earnings release that Xbox content and services revenue, including Game Pass, were down by 5%.

So, basically anything to do with Xbox and gaming for Microsoft is on the slide, though as The Verge notes, Microsoft isn't releasing any information on Xbox Game Pass membership rates. That obviously makes it difficult to gauge the impact of the Game Pass Ultimate price hike, which wasn't exactly warmly received by gamers.

Microsoft's whole Xbox endeavour, of course, is currently in flux. The company has continued to publish more games for play on Sony's competing PS5 console as part of its broader—and some would argue, incredibly confusing—"This is an Xbox" push to redefine what an Xbox means.

That push will even extend to jealously guarded IP such as Halo, the next installment of which will launch on both Xbox and PS5 this year, and also includes the Asus ROG Xbox Ally X, which is a handheld gaming PC with some trimmings added to Windows to Xbox-ify it a bit.

At the same time, Microsoft also has its ongoing "Dream Team" collab with AMD involving a purported a "portfolio" of next-gen Xbox devices. It's not yet clear if that will be truly custom console hardware, tweaked PC hardware like the Xbox Ally, or maybe both.

Whatever, it's hard to imagine that things can continue as they are, particularly when it comes to hardware. A 32% decline in revenue is not something that the hardware division can keep on repeating, that's for sure.

It does all seem to point to Xbox consoles as we've known them not being a thing, despite claims from Microsoft itself in October that, "we are actively investing in our future first-party consoles and devices designed, engineered and built by Xbox."

Long story short, if we don't find out what actually is an Xbox pretty soon, it risks not being anything at all.