Xbox revenue fell by $1.7 billion, or 7%, in fiscal year 2026 due to declines in content, services, and hardware sales, Microsoft reported July 29 [1, 2, 3]. Content and services revenue dropped between 5% and 10%, with a 10% decline in the fourth quarter alone [1, 4, 2]. The hardware segment saw a 29% revenue decrease attributed to fewer console sales [1, 2, 3].
Operating expenses rose about 8%, driven by research and development and impairment charges, while operating income declined 14% to 15%, pushing operating margins down to 21% year-over-year [1, 2]. Despite these losses, Xbox attracted over 200 million new players in FY26, although this growth did not translate into higher revenue, CEO Asha Sharma said: "We need to close that gap by investing in what players value. That will take time, but we expect to return to growth by the end of FY27" [1].
Xbox currently has around 100 million daily active users. Sharma outlined a goal to reach 500 million daily active users by 2030, aiming for sustained double-digit growth and industry-leading margins [4, 3]. Microsoft CEO Satya Nadella confirmed that the company is taking strategic steps to reset Xbox for long-term growth, stating, "We have the best IP in the industry and talented studios around the world" [1].
In fiscal 2026, Xbox laid off 1,600 employees and plans to cut another 1,600, while closing four studios with one more slated for closure [4, 3]. Sharma has highlighted four core priorities to drive growth: strengthening the console platform, growing games into global franchises, making Minecraft a creator platform, and expanding fan connection [3]. Plans also include leveraging major franchises like Fallout across media and product lines, and expanding casual gaming titles such as Candy Crush [4, 3].
Xbox is also expanding beyond consoles into PC, cloud gaming, and other platforms to broaden its reach [3]. Microsoft CFO Amy Hood and Sharma reviewed these results on July 29 and confirmed the company’s outlook for growth by the end of the fiscal year ending June 30, 2027 [1].
On July 30, Sharma sent a memo to Xbox staff outlining the growth priorities and the target of reaching half a billion daily active users by 2030 [3].
