Xbox revenue drops 10 percent as Microsoft’s cloud and AI business surges

Microsoft's Xbox revenue from content and services dropped 10 percent, and hardware sales declined 14 percent in the fourth quarter, according to Microsoft's earnings report released Wednesday. Meanwhile, Microsoft's cloud division revenue soared 27 percent to $59.3 billion, and its productivity business revenue rose 14 percent to $37.8 billion.

Xbox is having yet another tough quarter, as revenue from content and services like its Game Pass subscription dipped 10 percent over the past few months. At the same time, Xbox hardware sales declined 14 percent, according to Microsoft’s fourth-quarter earnings report released https://www.microsoft.com/en-us/investor/earnings/FY-2026-Q4/press-release-webcast on Wednesday. Xbox revenue drops 10 percent as Microsoft’s cloud and AI business surges Microsoft’s cloud division revenue soared 27 percent to $59 billion. Microsoft’s cloud division revenue soared 27 percent to $59 billion. The news comes just weeks after Xbox head Asha Sharma announced a “reset” plan for Xbox that included /games/948142/microsoft-xbox-layoffs-reset-asha-sharma sweeping layoffs and the spinoff of four games studios, including South of Midnight developer /games/961749/xbox-layoffs-compulsion-double-fine-indie Compulsion Games and Psychonauts creator Double Fine Productions. Sharma has also made some other big changes to Xbox, including lowering GamePass prices /news/915928/microsoft-xbox-game-pass-ultimate-price-drop , testing free, ad-supported cloud gaming /games/969969/xbox-testing-ad-supported-streaming , and making Xbox exclusives. /report/945639/xbox-exclusives-strategy-complicated-confusing Gears of War: E-Day and Clockwork Revolution Xbox also plans to raise the prices of its consoles by $100 and more starting August 1st /games/957042/xbox-price-increase-memory-shortage . Meanwhile, Microsoft has ramped up efforts in AI /podcast/944138/microsoft-ai-ceo-mustafa-suleyman-superintelligence-agi-openai-automation . Its cloud business revenue soared 27 percent to $59.3 billion this quarter, while revenue from its productivity business, which includes services like Microsoft 365 and LinkedIn, spiked 14 percent to $37.8 billion. Xbox wasn’t Microsoft’s only segment on the decline. The company’s Windows OEM and devices segment decreased 7 percent “driven by lower PC market demand.” Developing… Follow topics and authors from this story to see more like this in your personalized homepage feed and to receive email updates. Most Popular - Is it illegal to trick the US government into wiping your phone during a questionably legal search? - Samsung’s Galaxy Z Fold 8 feels like the future - AI’s finally expensive enough to make Wall Street nervous - The US government just banned Roombas - Hugging Face is being used to easily undress women and children