Microsoft has revealed its third-quarter outcomes, reporting a 5% lower in Xbox content material and companies and a major 33% drop in hardware revenues.
The numbers
For the three months ended March 31, 2026:
- Revenue: $82.9 billion (up 18%)
- Extra private computing (incl. Xbox revenue): $13.2 billion (down 1%)
- Working earnings: $38.4 billion (up 20%)
- Internet earnings: $31.8 billion (up 23%)
The highlights
Microsoft Cloud drove third-quarter development, producing over $54 billion on account of sturdy demand for Azure and different first-party AI purposes and companies.
Clever Cloud revenue rose 30% to $34.7 billion. Azure and different cloud companies grew 40% yr over yr, exceeding expectations.
Microsoft’s AI enterprise reached an annual run price of over $31 billion, a 123% enhance.
General gaming revenue fell 7%, whereas Xbox content material and companies declined 5% yr over yr, in comparison with a previous yr boosted by first-party content material.
Xbox hardware revenue dropped 33% after worth will increase for Sequence X and S consoles within the US final yr. Costs elevated by $20 to $70 throughout the hardware vary.
Regardless of decrease content material and hardware revenue, Xbox achieved file month-to-month lively customers and streaming hours this quarter.
During an earnings name, CEO Satya Nadella stated Microsoft was “doing the foundational work required to win again followers and strengthen engagement” throughout its shopper enterprise, together with Xbox.
“Within the close to time period, we’re targeted on fundamentals, prioritising high quality and serving our core customers higher,” stated Nadella.
“You additionally see this in Xbox, the place the workforce is recommitting to our core followers and gamers, and shaping the way forward for play. Final week’s Sport Go modifications are one instance of how we’re staying conscious of buyer suggestions.”
These modifications included worth reductions for the top-tier Sport Go subscription and the removing of Name of Responsibility from day-one launch.
Sport Go Final decreased from $29.99 to $22.99 per thirty days, and PC Sport Go was decreased from $16.49 to $13.99.
The current worth cuts didn’t totally offset the 50% enhance from October 2025. Sport Go Final was beforehand $19.99 on console and $11.99 on PC.
Microsoft expects Xbox content material and companies revenue to say no by a low single-digit proportion, whereas hardware revenue is projected to lower additional.
“[This reflects] a previous yr comparable that benefited from sturdy first-party content material, in addition to the current worth modifications for Xbox Sport Go as we concentrate on delivering extra worth to avid gamers,” stated CFO Amy Hood.
Final week, the agency introduced that Microsoft Gaming is reverting to Xbox below its new management.
As a part of a sweeping mission assertion, Xbox CEO Asha Sharma and CCO Matt Booty stated Microsoft Gaming “describes our construction, nevertheless it doesn’t describe our ambition.”
Sharma and Booty stated console stays central to its future plans, which might be “constructed to be inexpensive, private and open,” whereas its “new north star” might be each day lively gamers and enhancements throughout hardware, content material, experiences, and companies.
The executives added: “Alongside the way in which, we’ll re-evaluate our method to exclusivity windowing and AI and share extra as we be taught and resolve.”
Xbox’s future technique focuses on sustainable development and price self-discipline by strengthening Sport Go with a viable monetary mannequin.
Plans embrace increasing into new markets akin to China and different rising areas, focusing on mobile-first audiences, and sustaining development in reside video games and long-term stewardship.
The corporate will even improve creator-focused platforms akin to Minecraft, The Elder Scrolls, and Sea of Thieves, and enhance group options, together with discovery, customisation, social, and personalisation.