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Bottom line: While Microsoft continues to ride the AI wave, Xbox continues to struggle. New CEO Asha Sharma recently began implementing plans for a radical course correction, but it is still too soon to predict their impact. The company's fourth-quarter financial results for 2026 show a 10% fall in Xbox content and services and a 13% decline in hardware revenue, while Microsoft's overall profits jumped by 31%.
While Xbox's 13% YoY drop in hardware revenue is not as bad as last quarter's 33% plummet, it still caps off a full year of uninterrupted declines. Price hikes and worrying PR surrounding the brand are likely the primary factors, and the situation is expected to worsen when Xbox Series S|X consoles become at least $100 more expensive starting in August.
Xbox content and services revenue also fell by 10% YoY this quarter, compared with a 5% decline last quarter, which Microsoft again attributed to strong performance during the same quarter last year. The company is likely still referring to titles such as Call of Duty: Black Ops 6 and Minecraft, but this past quarter saw the release of one of Microsoft's most successful titles, Forza Horizon 6.
