Xbox sales continue to tank

Xbox income person been tanking for a portion present — and the communicative hasn’t gotten immoderate brighter. Microsoft conscionable released its Q1 2026 net and Xbox hardware gross was down 29 percent year-over-year. Last quarter, it was down 22 percent. Down 29 percent successful the archetypal 2 quarters of 2025, down 42 percent successful Q4 of 2024… You get the picture. 

As tariffs and ostentation instrumentality their toll, Microsoft has dramatically accrued the prices connected its gaming hardware, with the Series X present starting astatine $599.99. Microsoft’s effect has been to deemphasize the console and prosecute an “Xbox everywhere” strategy. That has yielded immoderate occurrence connected the contented and services front, though gross determination was mostly level this quarter, lone increasing 1 percent twelvemonth implicit year.

However, Microsoft would evidently similar to spot much maturation there. The institution has reportedly been pursuing melodramatic 30 percent nett margins there, starring to layoffs and cancelled projects.

Microsoft did spot hardware maturation from Windows OEM and Devices, with gross expanding a humble 6 percent twelvemonth implicit year. The institution stopped reporting Surface net separately, truthful it’s unclear however those devices are performing. They had been connected a dependable diminution for respective years.

It’s Azure and unreality services that stay the driving unit down Microsoft’s ascent. The maturation of its intelligent unreality services is substantial. Revenue accrued 28 percent twelvemonth implicit twelvemonth to $30.9 billion, with Azure specifically increasing 40 percent. 

More broadly, Microsoft Cloud gross was $49.1 billion, an summation of 26 percent from Q1 2025. The company’s unreality divisions and Azure person been increasing steadily for respective years now. 

In total, Microsoft reported $77.7 cardinal successful gross for the quarter, up 18 percent from the aforesaid clip past year. And its nett income was $27.7 billion, up 12 percent. While those increases are mostly driven by the company’s assorted unreality offerings, its productivity and concern processes inactive relationship for a important information of its income ($33 billion).