Microsoft released financial results for the first quarter of fiscal 26, reporting a 2% decline in overall gaming revenue and a nearly 30% drop in hardware sales.
Numbers
For the three months ended September 30, 2025:
- Income: $77.7 billion (up 18% year-on-year)
- Net profit: $27.7 billion (up 12% year-on-year)
- More revenue from personal computers (including Xbox): $13.8 billion (up 4% year-on-year)
Highlights
Microsoft's overall first-quarter revenue was driven by its cloud and artificial intelligence services, which grew 28% year over year to $30.9 billion.
While the “More PC” segment (which includes Xbox) increased 4% to $13.8 billion, overall gaming revenue fell 2% “due to lower Xbox hardware inventory.”
However, this was partially offset by 1% growth in Xbox content and services, including growth in Xbox Game Pass and “better-than-expected performance” of third-party content.
Looking specifically at hardware, Microsoft reported a 29% decline in sales due to low sales across its entire product line.
“We started the fiscal year strong, exceeding expectations for revenue, operating income and earnings per share,” said Microsoft Chief Financial Officer Amy Hood. “The continued development of Microsoft Cloud reflects growing customer demand for our differentiated platform.”
Looking ahead to the next quarter, Microsoft expects revenue to be between $79.5 billion and $80.6 billion, representing growth of 14% to 16%.
For Xbox content and services, the company forecast revenue declines in the “low to mid-single digits” due to fewer third-party games compared to the same period last year.
He notes that this could be “partially offset by growth in subscriptions.”
Microsoft's latest financial results come after price hikes in its gaming division.
Last month it was announced that Console prices in the US will rise for the second time “due to changes in the macroeconomic environment.” This included increases of $20-$70 across the entire equipment range.
In early October, Microsoft announced that it would Xbox Game Pass price increase by 50% “to offer more flexibility, choice and value to all players.”
A report released last week also suggests The price of Xbox development kits increased by 33% to $2000.
Meanwhile, Xbox President Sarah Bond confirmed that “next generation hardware is in development.”
“We have a partnership with AMD that we announced, so that's coming,” Bond said.
“Here we saw an opportunity to innovate in new ways and give gamers another choice to complement our next generation hardware. We always listen to what players and creators want.
“When there is demand for innovation, we are going to create it.”
