Xbox is still shrinking, but more slowly. Microsoft’s results for its first fiscal quarter of 2027, covering July through September, show Xbox content and services revenue down 2% year over year, or 1% in constant currency, according to GamesIndustry.biz.
Microsoft said the dip came from lower revenue from third-party games and Game Pass, partly offset by growth from its own first-party titles. Xbox hardware revenue fell 14%. Microsoft’s devices and consumer business, which includes gaming, brought in $15.5 billion, down 3%.
The rest of Microsoft had a very different quarter. Total company revenue rose 19% to $92.3 billion and net income climbed 32% to $36.6 billion, driven by cloud and AI demand.
Xbox CEO Asha Sharma responded with a statement on X, as reported by Pure Xbox. “In Q1, XBOX revenue declined 2% YoY, compared with a 10% decline a quarter ago,” she wrote, pointing to record engagement in Minecraft and World of Warcraft, double-digit growth on the Xbox PC platform, and what she called the most acclaimed Call of Duty in a decade. Sharma also said console supply is constrained and mentioned a new refurbishment program. “We’re making progress, with a lot more work ahead,” she added.
Chief financial officer Amy Hood gave a brighter outlook for the holiday quarter. She expects Xbox content and services revenue to grow by a mid-to-high single-digit percentage from October through December, while hardware revenue is expected to decline again year over year.
Microsoft CEO Satya Nadella pointed to Modern Warfare 4 and Grand Theft Auto VI, which arrives on Xbox next month, as big moments for the platform this holiday.
Call of Duty remains central to that pitch. Earlier this week Sharma said the series has passed $40 billion in lifetime revenue, and Modern Warfare 4’s October launch fell inside the current quarter rather than the one just reported. The October to December numbers will show whether that and GTA VI can turn the decline into growth.
