Despite growing success in the cloud and PC business, Microsoft is recording significant declines in the Xbox segment. The group blames its own first-party games for the weak quarter. The latest figures raise questions about the strategic direction for 2026.
In the second quarter of fiscal year 2026 had to Microsoft suffered a significant decline in Xbox sales. During the period mentioned, total revenue in this segment fell by 9 percent. The hardware sector was particularly hard hit: revenue from the sale of Xbox consoles and accessories fell by 32 percent. Sales of content and services also fell by 5 percent.
Microsoft-Finanzchefin Amy Hood led The decline in the gaming sector is directly attributed to the performance of its own titles: “[Der Umsatz im Spielebereich lag] below expectations driven by first-party content with cross-platform impact.”
Between October and December 2025, Microsoft released four major titles. These include “Ninja Gaiden 4”, “Keeper”, “Outer Worlds 2” as well „Call of Duty: Black Ops 7“.
“Black Ops 7” in particular was considered an important sales driver. But according to the latest US charts, the shooter remained behind titles like “Monster Hunter Wilds”, „Borderlands 4““NBA 2K26” and „Battlefield 6“ back. This means that the title missed the usual placements in the game charts for the “Call of Duty” brand.
Game Pass and PC gaming are becoming increasingly important
Regardless of the weak performance in the console sector, Microsoft sees progress in other segments. Amy Hood said she expects Game Pass revenue to grow in the current quarter. That would contradict the assumption that Changes to Game Pass caused the current decline.
Usage on the PC also apparently increased, at least in a very specifically defined area. Microsoft CEO Satya Nadella referred to “record numbers of PC gamers in paid streaming”.
Microsoft-Finanzchefin Amy Hood expressed similarly: “In gaming, we’re committed to delivering great games across Xbox, PC Cloud and all other devices. We’ve seen record numbers of PC gamers and paid streaming hours on Xbox.”
Despite such prospects, the Xbox brand is under pressure. Console sales continue to decline. One of the reasons: The Xbox Series S is lying with a price of $399 significantly above previous values, without offering a noticeable advantage over competitors such as the PS5 Digital Edition.
At the same time Microsoft is increasingly abandoning console exclusivity. For many gamers, this eliminates the incentive to invest in an Xbox console at all. At the same time, the question arises as to what Xbox results would look like without sales on other platforms. Especially PlayStation is a huge sales driver.
AI and cloud dominate
Ultimately, Microsoft’s focus seems to be shifting further, away from the console and towards PC, cloud and platform independence. The partnership with OpenAI and investments in artificial intelligence and cloud infrastructure also tie up money that needs to be saved elsewhere.
AI and general cloud dominance also made its presence felt in the latest Annual report noticed by Microsoft. They took up most of it. Microsoft’s cloud division (Azure and other cloud services) exceeded the $50 billion mark for the first time with an increase of 39 percent. In the previous quarter, however, it was still 40 percent.
At the same time, the forecast for future sales shot up, which is primarily due to OpenAI. The company had committed to obtaining $250 billion in cloud services from Microsoft. This once again highlights the entanglements among AI companies, which could ultimately lead to a bursting AI bubble.
Microsoft CEO Satya Nadella seems less worried to be: “We are only in the early stages of AI adoption. And Microsoft has already built an AI business that is larger than some of our largest businesses. We are pushing the boundaries of all our AI technology to create new value for our customers and partners.”
The bottom line is that Microsoft’s net profit climbed massively to $38.46 billion, after $24.11 billion in the same quarter last year. 81.27 billion US dollars were turned over.
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