Xbox Outlook: Smaller Setback Than Expected – GTA 6 Is Set to Bring Growth

TVS News AI, editorially supervised, presents Xbox Outlook: Smaller Setback Than Expected – GTA 6 Is Set to Bring Growth.

Microsoft has published the results for the period from July to September 2026. The gaming business again recorded lower revenue in the first quarter of the fiscal year. However, the 2 percent decline was smaller than the roughly 5 percent initially expected. Gamekult's report provides the full context.

Xbox Revenue Falls to $5.37 Billion

The quarterly figure

Xbox revenue stood at $5.37 billion during the reporting period. In the same quarter of the previous year, it was $5.50 billion. Microsoft was therefore $130 million below the previous year's figure, but still came relatively closer to its own expectations than initially assumed.

At the same time, Xbox remains the company's weaker business. Microsoft's total quarterly revenue rose to $92.3 billion, an increase of 19 percent. Net income came in at $36.6 billion, up 18 percent. The growth therefore did not come from the gaming business, but was driven substantially by Microsoft's cloud activities.

Content and Services Carry the Business While Hardware Plunges

$5 billion from content and services

Microsoft generated $5 billion in revenue from Xbox content and services. According to Microsoft, the business is being weighed down by declines in third-party content and the Xbox Game Pass. This decline was partly offset by growth in Microsoft's own games.

$330 million from hardware

Hardware revenue, by contrast, fell to $330 million, a decline of 14 percent compared with the same quarter a year earlier. The sharper drop in the console business therefore contrasts significantly with the comparatively stable business in digital content, players and subscriptions. Microsoft also expects console sales to continue declining in the second quarter.

Price Increase Meets Historically Weak Console Demand

A more expensive product, fewer units sold

During the reporting period, prices for the Xbox Series X*|S rose. Despite the higher price, hardware revenue fell 14 percent. According to the US charts compiled by Circana, Xbox consoles had been the manufacturer's worst-selling consoles since the start of the year.

The inventory situation is not the same everywhere

Microsoft CEO Asha Sharma said demand for Xbox consoles was exceeding available inventory. According to Gamekult, the shortage does exist in certain parts of Europe and in Brazil. By contrast, there was no corresponding shortage in the major markets of the United States and the United Kingdom. An embedded comment from Mat Piscatella expressly questions the explanation for demand in light of the current platform cycle.

First-Party Titles Offset Part of the Decline

Microsoft's own content is growing

Microsoft points to Forza Horizon 6, which had already been released in the previous quarter, as well as strong demand for the PlayStation 5* ports of Call of Duty: Black Ops and Call of Duty: Black Ops 2. The new releases Halo: Campaign Evolved and Minecraft Dungeons II also contributed to the growth of its own content.

Minecraft reaches record levels

CEO Satya Nadella also said during the presentation that Minecraft had generated record revenue and record engagement. The game therefore helped cushion, at least in part, the decline in third-party content and Game Pass.

According to Gamekult, the separation of 1,600 positions and five studios has not had a positive revenue effect. Nevertheless, operating expenses in the Devices and Consumer division, which includes Xbox as well as Windows and Surface, fell 3 percent. Microsoft attributed the decline primarily to Xbox; Gamekult sees a direct connection to the layoffs overseen by Asha Sharma.

GTA VI Is Set to Deliver Growth – Consoles Will Not

Microsoft forecasts 5 to 9 percent more

For the second quarter of the fiscal year, Microsoft expects revenue from Xbox content and services to increase by 5 to 9 percent. Planned releases include Call of Duty: Modern Warfare 4, World of Warcraft: Forever and Grand Theft Auto VI. The growth forecast therefore rests not on additional console sales, but on software and digital offerings.

The strongest limitation is clear: GTA VI can drive growth in content and services, but it cannot reverse falling hardware revenue. Microsoft therefore explicitly expects the console business to continue declining in the coming quarter. The source provides no specific revenue contribution, release date or sales forecast for GTA VI.

Xbox Remains the Counterweight to the Cloud Business

Two days after the quarterly figures

Just two days after the quarterly figures, Microsoft announced a historic plan for voluntary departures of up to 60,000 employees. The company wants to organize itself more around the development of artificial intelligence and no longer rules out financing through loans.

This produces a clear picture: Microsoft's growth comes from the cloud, while Xbox, with $5.37 billion and a 2 percent decline, makes only a limited contribution to the company. Weaker hardware sales are currently being cushioned by content and services. GTA VI is expected to push this segment further upward in the coming quarter, but will not end the search for consoles.