Xbox has “work to do” as console sales drop 33% in Q3
Microsoft said gaming revenue fell by $380 million in the quarter.
Xbox continues to perform poorly, with Microsoft on Wednesday reporting a 33% plunge in console sales in its fiscal third quarter.
Gaming revenue overall dropped 7%, or $380 million, in the quarter, and Xbox content and services revenue — which includes Game Pass, digital game sales, and downloadable content — fell 5%.
While the company said it “set new records for monthly Xbox active users in the quarter,” new Xbox chief Asha Sharma said growth hasn’t matched ambition.
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.
— Asha (@asha_shar) April 29, 2026
The outlook isn’t great, either, with Microsoft guiding for Xbox content and services revenue to “decline in the low-teens” in Q4, reflecting the company’s recent $7 Game Pass price drop. Hardware revenue is also expected to decline.
Wednesday’s results put Microsoft’s nine-month gaming revenue loss at $1.12 billion, with Xbox console revenue down 31% despite a 30% price hike for the console in 2025.
Xbox has fallen significantly behind rivals Sony and Nintendo over the past two console generations. In November, Xbox was even outsold by the motion-controlled Nex Playground console.
Xbox’s new leadership is hoping to turn these results around. In a memo to staff last week, Sharma and Xbox Chief Content Officer Matt Booty acknowledged that players are frustrated and pricing has been hard to keep up with. The pair highlighted the path ahead, with a focus on Project Helix (the next Xbox console), expansion into China and mobile-first markets, and strengthening the economics of Game Pass.
