Microsoft's Xbox hardware revenue fell 33 percent year-on-year in Q3 FY2026, despite overall company revenue rising 18 percent to $82.9 billion. Gaming revenue declined seven percent, prompting Xbox leaders to pledge renewed focus on core fans. The firm recently cut Game Pass prices in response to customer feedback.
Microsoft released its Q3 FY2026 earnings on April 30, covering January 1 to March 31. Total revenue climbed 18 percent to $82.9 billion, but gaming revenue dropped seven percent. Xbox content and services fell five percent year-on-year, which Microsoft attributed to a strong prior-year comparison from first-party titles. Hardware revenue saw the steepest decline at 33 percent, following price hikes for Xbox Series X/S consoles in the US late last year—the second increase in six months—due to macroeconomic changes, as the company stated in November 2025. CEO Satya Nadella noted new records for monthly Xbox active users and game streaming hours in the quarter. Xbox head Asha Sharma acknowledged on X that while the business expanded margins, player and revenue growth fell short of ambitions. She said the team has work to do to earn players' loyalty. Nadella affirmed the company is recommitting to core fans, prioritizing quality and engagement. He highlighted recent Game Pass price reductions as responsive to feedback: in the US, Ultimate dropped from $29.99 to $22.99 monthly, and PC Game Pass from $16.49 to $13.99. UK prices fell similarly, with Ultimate to £16.99 and PC to £10.99. Sharma, newly in her role, also ended the 'This is an Xbox' campaign and emphasized Project Helix, next-generation hardware set to lead in performance, though no release date was specified.
