Xbox acknowledges a quarter below expectations despite cloud and AI boost

Revenue from content, services and hardware of Xbox falls in front of the strong performance of 2024.

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Microsoft has once again put the focus on the strength of its cloud and artificial intelligence business in its latest financial report, but the Xbox area has not fared as well as in previous quarters. The company itself has acknowledged that the performance of the gaming business has fallen short of expectations, especially compared to the excellent close of 2024.

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Although Redmond insists that the overall context remains positive, the data shows a clear correction in several key areas of the Xbox ecosystem, both in content sales and hardware, something that is already starting to draw a change of cycle after a particularly strong year.

Xbox revenue declines in content, services, and hardware

During the last fiscal quarter, Xbox content and services revenue decreased by 5% compared to the same period in 2024, while the hardware business fell by 32%, a very pronounced decline that reflects the slower pace of console sales. Overall, the gaming area recorded a 9% decline in constant currency.

In the conference call following the presentation of results, Microsoft’s financial director, Amy Hood, openly admitted that Xbox content and services revenue was below internal expectations. According to her, this decline is largely due to the impact of the strong performance of the previous year, which had significantly raised the bar for comparison.

Microsoft also pointed out that the decline was driven by first-party content with an impact on the entire platform, suggesting that certain launches and first-party services did not replicate the commercial effect achieved in 2024. Nevertheless, the company insists that its long-term strategy continues to rely on the cloud, AI, and services, while Xbox faces a period of adjustment after an exceptional year.