Microsoft has released its recent financial report, indicating a 7% drop in Xbox revenue over the fiscal year and a 10% decrease during the fourth quarter. Although Game Pass experienced growth, console sales declines led to a 29% reduction in hardware revenue.
Financial Performance
For the quarter ending June 30, 2026:
- Total Revenue: $90 billion (an 18% rise from the previous year)
- Net Income: $35.8 billion (a 31% increase compared to the prior year)
- More Personal Computing Revenue, including Xbox: $12.9 billion (declined by 4% compared to last year)
Satya Nadella, Microsoft’s CEO, characterized the fourth quarter as a robust finale to an outstanding fiscal year.
“We aim to harness AI to empower individuals and enhance their capabilities,” Nadella stated. “Additionally, we’re focused on enabling organizations to develop their own innovation processes without outsourcing crucial intellectual property.”
The overall sales increase for Microsoft was largely due to its Cloud segment, which jumped 27% to $59.3 billion. Growth in Intelligent Cloud services and Productivity & Business Processes was also notable, rising by 32% to $39.3 billion and 14% to $37.8 billion, respectively.
A 10% decline in Xbox content and services contributed to a 4% fall in More Personal Computing revenue. Compared to last year, Xbox had benefited from a strong showing of first-party content.
Hardware revenue also fell by 13% and is expected to decrease further in the ensuing year.
For the entire fiscal year, Microsoft reported an 18% rise in total revenue, equating to $331.8 billion. Operating income increased by 21% to $155.2 billion, with net income reaching $133.7 billion, a 22% rise.
In response to the quarterly and yearly results, Microsoft implemented layoffs, impacting 4,800 positions, or 2.1% of its global workforce.
“We’re making strategic decisions across content, platforms, and operations to prepare for sustained growth,” Nadella added. “With premier intellectual property and talented studios globally, we are confident in restoring business growth by fiscal 2027.”
These changes included the reduction of 1,600 roles at Xbox, with a total of 3,200 anticipated job cuts planned for FY27.
Part of the business restructuring involved shifts in studio management. Now independent, Double Fine Productions and Compulsion Games are under new leadership, while Undead Labs and Ninja Theory are exploring new ownership options. Arkane Leon is also examining potential strategic opportunities.
Recently, Double Fine announced the termination of 23 positions after separating from Xbox.
Microsoft’s EVP and chief people officer, Amy Coleman, noted, “Our business model and the technology landscape are rapidly evolving. Customer needs are changing, necessitating organizational and operational transformation.”
