Xbox console sales drop by 33% as Microsoft struggles to make money from games

Microsoft’s results for the recent fiscal quarter reiterate how bleak Xbox’s future is, even with new boss Asha Sharma promising to turn things around.

Ever since Asha Sharma took over as the new boss of Xbox, back in February, there’s been a renewed sense of optimism amongst some fans that the brand might be back on track, with Sharma saying all the right things to try and win back fans.

However, Xbox has made a habit of overly optimistic predictions and so far there’s little to suggest anything will really improve. What matters is results and while Sharma has certainly thrown herself into her new leadership role, overseeing a Game Pass price cut and sharing the first Project Helix details, she still faces an uphill battle.

Nothing makes that more evident than Microsoft’s recent financial results, which recap the third quarter of its 2026 fiscal year (January 2026 to March 2026).

As a reminder, things already looked bleak during the previous quarter. Gaming revenue had declined by 9% compared to the same period the year before, which was blamed on the poor performance of first party games, while Xbox hardware sales were down by 32%.

Chief financial officer Amy Hood warned that things wouldn’t get any better in the following quarter and she was right, as the latest results show gaming revenue was down by 5% compared to last year.

Hood pins this on how last year enjoyed a ‘strong first party content performance,’ but since she doesn’t provide any examples, it’s unclear what games she’s referring to.

In the January to March period in 2025, the only new first party Xbox releases were Avowed, which reportedly started strong but is now considered a flop, and the PlayStation 5 port of Age Of Mythology: Retold, which reportedly sold 41,000 copies in its first few weeks.

Since Hood never specifies new releases, it’s possible she’s referring to continued sales of games that launched in the previous quarter, such as Call Of Duty: Black Ops 6 and Indiana Jones And The Great Circle.

As for hardware revenue, it should come as no surprise that people still aren’t buying many new Xbox consoles. Compared to the same period last year, hardware revenue is down by exactly a third.

Microsoft doesn’t share sales figures, but unofficial estimates put them at less than 34 million, compared to over 100 million for the PlayStation 5. This lends credence to the idea that Microsoft will want to push out its next console, currently codenamed Project Helix, in 2027.

None of this can be attributed to Sharma since she only took charge in February, so it’ll be a long while until we see how her leadership meaningfully impacts the Xbox division.

Xbox does have some key releases this year – Forza Horizon 6 in May, Fable in the autumn, the Halo: Combat Evolved remake, Gears Of War: E-Day, and the inevitable Call Of Duty game – but with console sales in the gutter, they’ll likely rely on the PC and PlayStation 5 versions to make much money from them.

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As a reminder, Fable and Halo are launching day one for PlayStation 5, while Forza Horizon 6’s PlayStation 5 version isn’t launching until the second half of the year.

E-Day, meanwhile, is not confirmed for PlayStation 5 yet, but that will likely happen since the remaster of the original trilogy is already available on Sony’s machine.

The new Call Of Duty will obviously be multiplatform too and without a day one Game Pass launch threatening to cannibalise its sales, it stands to perform better than Black Ops 7, which was both a sales disaster and prompted an apology from Activision.

All in all, the hints and teases that Xbox will return to exclusives are very hard to believe, especially since Project Helix is expected to be extremely expensive.

With claims of it costing over £1,000, only the most hardcore of fans will consider buying Project Helix day one, which means even fewer people to buy exclusives.

We certainly don’t envy Sharma being the one who has to turn things around, with her acknowledging Xbox’s poor performance in a tacit X post.

‘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,’ wrote Sharma.

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