Xbox has been having a tough time promoting consoles currently, and it did not get any higher over the 2025 vacation quarter. Microsoft has simply reported its Q2 2026 earnings, together with the information that {hardware} gross sales had been down 32% year-over-year, after quarter upon quarter upon quarter of {hardware} declines.
Although we do not have precise numbers to inform how a lot income is being misplaced out on right here, we will get a way of how grim that is for the {hardware} by previous quarters. Final quarter, Q1 of 2026, hardware declined 29% year-over-year. The quarter earlier than that, This fall of 2025, {hardware} was down 22%. The quarter earlier than that? Down 6%. Earlier than that? Down 29%. And earlier than that, 29%, in Q1 of 2025, which was July – September of 2024. Going again even additional by way of Microsoft’s earnings studies, the prior 12 months quarters noticed declines of 42% (woah) in This fall of 2024 and 31% in Q3. In actual fact, you need to go all the best way again to Q2 2024, which was October by way of December of 2023, to search out the final time Xbox’s {hardware} income was higher throughout that interval than it was the 12 months earlier than – it was up a whopping 3% over the vacation quarter.
And sure, it was down 7% the quarter earlier than that, 13% earlier than that, down 30% earlier than that, down 13% earlier than that, and eventually up 13% year-over-year in Q1 of 2023, or July – September of 2022, at which level the numbers begin lastly exhibiting constant enchancment year-over-year, largely because of proximity to the launch of the Sequence S and X.
Now, look. It is extraordinarily regular for a six-year-old console to not be promoting in addition to it was within the first few years after launch. That is to be anticipated. Early adopters have a tendency to purchase up consoles in giant portions at launch, distributers run out of inventory, extra is produced, folks proceed to purchase till the overwhelming majority of fanatics who need the console have already got one, after which gross sales decelerate because the console will get older. Nevertheless it…often takes a bit longer to get to that time! For comparability’s sake, we now have proof that neither the PlayStation 5 nor the Nintendo Switch have had this a lot hassle on this scale promoting methods at this stage of their respective life cycles, and definitely not way back to lower than three years after launch. There’s perhaps a motive why we now have onerous unit gross sales numbers of Switches and PS5s from Nintendo and PlayStation, however no official numbers in anyway from Xbox on the Sequence S and X.
None of that is stunning to anybody who’s paying consideration. We have been studying headlines in regards to the strugglines of the Xbox Sequence consoles for the final a number of years now. Within the U.S., Xbox console gross sales hit an all-time November low in 2025, after a number of years in a row of declining {hardware} gross sales in what’s often the busiest retail month with Black Friday.
These newer struggles are probably tied as effectively to the 2 spikes in Xbox console costs simply this 12 months, which noticed the least costly Xbox rise to $400, and the costliest to an unimaginable $800. Its recently-released ROG Ally launched final 12 months at a whopping $1000. And since a lot of the excessive costs are tariff-related, the U.S. – Xbox’s greatest market – is primarily impacted right here. In keeping with Circana analyst Mat Piscatella chatting with us final December, the common worth per Xbox unit within the U.S. has risen 30% year-over-year in 2025.
Xbox appears to be well-aware that its console enterprise is severely struggling. Whereas it is promised a brand new, next-gen console to observe the Sequence, it is also stated such a console can be a “very premium, very high-end curated expertise.” And regardless that there have been rumors it is contemplating backing off about its {hardware} plans not too long ago, Xbox continues to be denying them, whilst a former Xbox founding member says that “Xbox {hardware} is useless.”
Whereas the {hardware} declines had been essentially the most noteworthy determine from Microsoft’s earnings yesterday, it is not like software program was doing an entire lot higher. Content material and providers income dropped 5% year-over-year, and total gaming declines precipitated income within the Extra Private Computing phase of Microsoft to drop 3% year-over-year. Within the investor presentation, CFO Amy Hood stated that the income drop was “pushed by first-party content material with influence throughout the platform,” suggesting that its first-party video games (maybe Name of Responsibility?) did not do in addition to they anticipated them to.
All-in-all, one other actual tough one for Microsoft’s gaming division.
Rebekah Valentine is a senior reporter for IGN. Received a narrative tip? Ship it to rvalentine@ign.com.