Xbox gross sales have been tanking for some time now — and the story hasn’t gotten any brighter. Microsoft simply launched its Q1 2026 earnings and Xbox {hardware} income was down 29 p.c year-over-year. Final quarter, it was down 22 p.c. Down 29 p.c within the first two quarters of 2025, down 42 p.c in This fall of 2024… You get the image.
As tariffs and inflation take their toll, Microsoft has dramatically elevated the costs on its gaming {hardware}, with the Collection X now beginning at $599.99. Microsoft’s response has been to deemphasize the console and pursue an “Xbox in every single place” technique. That has yielded some success on the content material and companies entrance, although income there was largely flat this quarter, solely rising one p.c yr over yr.
Microsoft did see {hardware} development from Home windows OEM and Units, with income rising a modest 6 p.c yr over yr. The corporate stopped reporting Floor earnings individually, so it’s unclear how these gadgets are performing. They’d been on a gentle decline for a number of years.
It’s Azure and cloud companies that stay the driving power behind Microsoft’s ascent. The expansion of its clever cloud companies is substantial. Income elevated 28 p.c yr over yr to $30.9 billion, with Azure particularly rising 40 p.c.
Extra broadly, Microsoft Cloud income was $49.1 billion, a rise of 26 p.c from Q1 2025. The corporate’s cloud divisions and Azure have been rising steadily for a number of years now.
In complete, Microsoft reported $77.7 billion in income for the quarter, up 18 p.c from the identical time final yr. And its web earnings was $27.7 billion, up 12 p.c. Whereas these will increase are largely pushed by the corporate’s varied cloud choices, its productiveness and enterprise processes nonetheless account for a good portion of its earnings ($33 billion).
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