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

<figure> <img alt="Vector illustration of the Xbox logo." data-caption="" data-portal-copyright="Illustration: The Verge" data-has-syndication-rights="1" src="https://platform.theverge.com/wp-content/uploads/sites/2/chorus/uploads/chorus_asset/file/25290359/STK048_XBOX_C.jpg?quality=90&#038;strip=all&#038;crop=0,0,100,100" /> <figcaption> </figcaption> </figure> <p class="wp-block-paragraph">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 <a href="https://www.microsoft.com/en-us/investor/earnings/FY-2026-Q4/press-release-webcast">Microsoft's fourth-quarter earnings report released</a> on Wednesday.</p> <p class="wp-block-paragraph">The news comes just weeks after Xbox head Asha Sharma announced <a href="https://www.theverge.com/games/948142/microsoft-xbox-layoffs-reset-asha-sharma">a "reset" plan for Xbox that included</a> sweeping layoffs and the spinoff of four games studios, <a href="https://www.theverge.com/games/961749/xbox-layoffs-compulsion-double-fine-indie">including <em>South of Midnight</em> developer</a> Compulsion Games and <em>Psychonauts</em> creator Double Fine Productions.</p> <p class="wp-block-paragraph">Sharma has also made some other big changes to Xbox, including <a href="https://www.theverge.com/news/915928/microsoft-xbox-game-pass-ultimate-price-drop">lowering GamePass prices</a>, tes …</p> <p><a href="https://www.theverge.com/tech/972738/xbox-revenue-microsoft-earnings-q4-2026">Read the full story at The Verge.</a></p>