Microsoft keeps failing to sell enough Xbox consoles

Microsoft has announced its earnings report for their Q3 2026 fiscal year, and the Xbox division has been hit the hardest, recording a 33% decline in hardware sales. However, the overall financial health of Microsoft seems to be doing well enough, with AI, cloud and productivity helping the company record USD82.9 billion in revenue.

Xbox hardware has been on a decline for some time now, with their previous Q2 2026 report also showing a 32% decease in hardware sales year-over-year. This decline seems to be strongly down to increased global pricing for the Xbox last year. Xbox content and services saw a 5% dip as well. New Xbox chief Asha Sharma has already taken some steps to win back gamers, rebranding Microsoft Gaming back to Xbox and lowering Game Pass pricing globally.

Xbox earnings today. While we have made progress expanding the business and our margins, player and revenue growth has not yet met our ambition. We know we have work to do to earn every player today and into the future.

Other Microsoft earnings report highlights include AI revenue now surpassing USD37 billion in annual run rate, while Azure grew 40% year-over-year. They’ve also highlighted that they’ve exceeded over 20 million paid Microsoft 365 Copilot seats. In total, the company reported USD54.5 billion in revenue just from its cloud business, a 29% year-over-year increase. Windows OEM and devices however saw a 2% decrease, with Microsoft caught up in the global memory and storage shortage.

Overall, Microsoft CEO Satya Nadella states that the company is focused on delivering cloud and AI infrastructure and solutions that empower businesses in this new ‘agentic computing’ era. He also touched on their consumer side of things, saying how they’re now putting in the work to win back fans across Windows, Xbox, Bing and Edge.

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