Xbox Sees Year-over-Year Decline in Q2 FY26 Hardware and Services
Microsoft’s recently released financial statement for Fiscal Year 2026, Q2, reveals a year-over-year decline for Xbox in both hardware and services revenue.
Declining Revenue Across the Board
In Q2 FY26, Xbox’s content and services revenue experienced a 5% decrease compared to Q2 FY25. Hardware revenue faced a steep decline of 32% during the same period. Overall, gaming revenue dropped by 9%, marking a significant downturn for the division.
Notable Figures
- 5% decline in Xbox content and services revenue vs. Q2 FY25
- 32% decrease in hardware revenue vs. Q2 FY25
- Overall gaming revenue down by 9%
This marks the first instance in over a year where Xbox has reported a year-over-year decline in content and services. The recent release of the much-anticipated Call of Duty title, Black Ops 7, has reportedly underperformed when compared to its predecessor, Black Ops 6 from 2025.
Future Projections
Amy Hood, Microsoft’s Chief Financial Officer, outlined guidance for the next quarter, anticipating a total revenue decline in the mid to high single digits (4-9%). Specifically, she indicated that the content and services segment could see a decline in the mid-single digits (4-6%).
Insights from Leadership
During the Q2 webcast, Microsoft CEO Satya Nadella highlighted a positive trend, reporting “record PC players and streaming hours on Xbox.” However, Amy Hood also mentioned that performance fell “below expectations, driven by first-party content with impact across the platform.”
Looking ahead to Q3 FY26, guidance suggests another expected decline in revenue, albeit partially offset by growth in Xbox Game Pass subscriptions. Hardware revenue is projected to continue declining year-over-year.
Final Thoughts
The data indicates that Xbox is navigating a challenging fiscal period. Stakeholders and gaming enthusiasts alike eagerly await further developments in the upcoming quarters.
