Microsoft shared its earnings results for Q3 FY2026, revealing a steep 33 percent drop in Xbox hardware revenue year-on-year. Despite the overall revenue rising 18 percent to $82.9 billion, gaming revenue fell by seven percent, highlighting a challenging period for the Xbox division. The company aims to win back core fans and address revenue growth that has not met expectations.
The updated figures show that Xbox content and services revenue dropped five percent, while monthly active users for Xbox set new records during this quarter. In light of these results, Microsoft CEO Satya Nadella stated that the company is focused on foundational work to improve engagement across its platforms, including Xbox, as well as Bing and Windows.
About Xbox
Xbox is a gaming brand created and owned by Microsoft, which includes a series of consoles, gaming services, and games. The Xbox Series X and Series S are the latest consoles released in November 2020, and the brand continues to evolve, with a focus on both hardware and software improvements to enhance user experience.
Game Pass Price Drops
In a bid to attract more subscribers, Microsoft has reduced the price of Xbox Game Pass Ultimate in the US from $29.99 to $22.99 per month. Similarly, the PC Game Pass price dropped from $16.49 to $13.99 per month. In the UK, Game Pass Ultimate now costs £16.99, down from £22.99, while PC Game Pass reduced from £13.49 to £10.99. These changes are a direct response to customer feedback, aiming to increase accessibility and user satisfaction.
Focus on Core Features
Alongside the price adjustments, Microsoft announced performance improvements for lower memory devices in Windows, a streamlined Windows Update experience, and a renewed emphasis on core features and fundamentals. This approach is designed to enhance user engagement and satisfaction across all platforms, including Xbox, as the company seeks to recommit to its core fans.
Future Hardware Plans
Asha Sharma, the newly appointed Xbox boss, addressed the need for improvement in player and revenue growth, stating, "while we have made progress expanding the business and our margins, player and revenue growth has not yet met our ambition. We know we have work to do to earn every player today and into the future." The company is also focusing on the next generation of hardware, referred to as Project Helix, with Sharma asserting, "This hardware will lead in performance." However, the exact release timeline remains unclear.
Community Reaction
Despite the positive engagement metrics, the Xbox brand faces challenges, including calls for a boycott from the BDS movement due to Microsoft’s alleged complicity in geopolitical issues. As Sharma works to improve the brand's image, addressing these concerns while enhancing player engagement will be critical for Xbox’s future.