Xbox Hardware Sales Decline Persists for Two Consecutive Years
The gaming industry is facing notable challenges, particularly for Xbox, as revealed in Microsoft’s latest financial report. According to the data for Q2 2026, Xbox hardware sales have declined for two consecutive years, with sales decreasing by 32% year-over-year during the holiday quarter of 2025. This decline marks a continuing trend in dwindling hardware sales for the console.
Consistent Decline in Xbox Hardware Sales
Microsoft’s report detailed a consistent drop in Xbox hardware sales across several quarters:
- Q1 2026: Down 29%
- Q4 2025: Down 22%
- Q3 2025: Down 31%
- Q2 2024: Last positive quarter (+3%)
In comparison, prior quarters leading up to Q2 2024 saw declines of 6%, 29%, and 29% for Q1 2025. The last time Microsoft’s hardware revenue showed improvement during the holiday quarter was in late 2023.
Comparison with Competitors
While it is typical for consoles to experience decreased sales as they age, the extent of Xbox’s struggles stands out. Unlike the Xbox Series consoles, both the PlayStation 5 and Nintendo Switch have not faced such significant challenges just a few years post-launch.
Market Factors Affecting Sales
Several market factors contribute to Xbox’s current situation, particularly price increases and a lack of transparency regarding unit sales. In 2025, the average Xbox unit price in the United States rose by 30%, driven partly by tariff-related issues. The least expensive model increased to $400, while premium models reached $800.
Shifts in Strategy
In response to declining sales, Microsoft has hinted at a new next-gen console, positioning it as a “very premium, very high-end curated experience.” However, there have also been rumors regarding a potential shift away from hardware focus, with speculation growing in the industry.
Overall Financial Performance
The struggles in hardware sales have also impacted Microsoft’s overall gaming revenue. In the same financial report, the company noted a 5% decline in content and services revenue year-over-year. Additionally, revenue from its More Personal Computing segment dropped by 3%. CFO Amy Hood indicated that these declines stem from issues with first-party content performance.
In conclusion, Xbox hardware sales have faced significant challenges, with declines persisting for two consecutive years. As the company navigates these difficulties, the future of Xbox’s console strategy remains uncertain.
