Microsoft's FY26 Q3 earnings report, released on April 29, 2026, reveals that Xbox gaming revenue declined by 7% year-over-year, amounting to a $380 million drop. This continues a trend of three consecutive quarters of decline for the segment. Xbox content and services revenue fell 5%, attributed to a tough prior-year comparison bolstered by strong first-party titles.
Xbox hardware revenue experienced a particularly pronounced decrease of 33%, marking the second straight quarter of over 30% declines and underscoring ongoing challenges in console sales volumes. Despite these setbacks, gross margins for the More Personal Computing segment, which includes Gaming, improved by 6%, partly due to a favorable sales mix.
Xbox CEO Asha Sharma acknowledged the results in measured terms: '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.' This comes as Microsoft's overall revenue rose 18% to $82.9 billion, propelled by AI and Cloud services, rendering Gaming a relatively minor line item.
On X, users methodically noted the figures—hardware down 33%, content and services down 5%—with some questioning strategic pillars like exclusivity. The metrics suggest persistent headwinds, though margins offer a sliver of consolation in this otherwise subdued quarter.
