Microsoft is still not convinced about the viability of its gaming division, Xbox. This week saw the release of its first quarter results for fiscal 2026, for the period between 1 July and 30 September, and there are some interesting readings from the data, provided by Gamesindustry.biz.
First, Microsoft has generally done very well. At the start of the fiscal year it posted gross revenues of $77.7 billion, up 18% from the same period last year, and net income of $27.7 billion, up 12% from a year earlier. However, when we look at the Personal Computing division, of which Xbox is a part, the numbers are much less bright: While year-on-year growth was 4%, the gaming division suffered an across-the-board drop of %2, mainly due to lower Xbox hardware sales. The drop in hardware compared to the same period last year was 29%.
While the figures are somewhat worrying, the decline has been cushioned by growth in other areas such as software and services, such as Game Pass. In particular, the report cites an "above forecast" performance in third-party content. These figures reflect a 1% year-on-year growth.
"We had a strong start to the fiscal year, exceeding expectations in revenue, operating income and earnings per share," said Microsoft CFO Amy Hood. "The continued strength of Microsoft Cloud reflects growing customer demand for our differentiated platform."
So while the data is good for the company as a whole, there are clearly areas for improvement at Xbox. The data also partly reflects general user dissatisfaction with the recent Xbox device price hike, the second in 2025.
How do you think Microsoft executives will react to Xbox's tepid results as the fiscal year gets underway?