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

What the report says

The Verge reports that Microsoft’s Xbox business declined again in the company’s fourth-quarter fiscal 2026 results, with Xbox content and services revenue, including Game Pass, down 10 percent over the past few months. Xbox hardware revenue also fell 13 percent, according to the earnings report cited by The Verge. The article was published July 29, 2026, after Microsoft released its quarterly figures on Wednesday.

The gaming results come amid a broader restructuring at Xbox. The Verge reported that Xbox head Asha Sharma recently outlined a “reset” that included major layoffs and the spinoff of four studios, including Compulsion Games and Double Fine Productions. The article also noted other changes under Sharma, including lower Game Pass prices, tests of free ad-supported cloud gaming, some high-profile Xbox exclusives, and planned console price increases of $100 or more starting August 1.

Microsoft CEO Satya Nadella said on the company’s earnings call, as quoted by The Verge, that Microsoft is making changes across Xbox’s content, platform and operations to position the business for longer-term growth, and that the company expects Xbox to grow again in fiscal 2027.

The weakness in gaming contrasted with Microsoft’s cloud and AI-driven businesses. The Verge reported that overall company revenue reached $90 billion, with Microsoft Cloud revenue up 27 percent to $59.3 billion. Productivity revenue, including Microsoft 365 and LinkedIn, rose 14 percent to $37.8 billion, Microsoft 365 Copilot passed 30 million paid seats, and Azure revenue topped $100 billion for the first time. Windows OEM and devices revenue also declined, falling 7 percent because of weaker PC market demand.