Xbox content and services revenue falls 2% in Microsoft Q1
Microsoft also reported Xbox hardware revenue down 14% year-over-year, with lower Activision amortization cutting Devices and Consumer costs.
Microsoft reported on October 28, 2026, that Xbox content and services revenue fell 2 percent in the first quarter of its fiscal year, a period covering July, August and September, according to kotaku.com. Xbox hardware revenue dropped 14 percent year-over-year in the same quarter.
The company said operating expenses for its Devices and Consumer division fell 3 percent, driven by Xbox. Cost of revenue for the Devices and Consumer segment declined 8 percent, which Microsoft attributed to lower amortization of intangible assets from its Activision acquisition.
The results follow a major internal shake-up at the gaming division. Before this report, Xbox head Asha Sharma announced what she described as the most significant restructure in Xbox history, cutting more than 1,600 jobs, with 3,200 planned by July of next year.
The hardware decline extends a run of weaker comparisons. In the prior quarter, Xbox hardware revenue was down 13 percent year-over-year, and it was down 33 percent in the quarter before that. In April, a price cut for Xbox Game Pass took effect.
Quick answers
How much did Xbox revenue fall in Microsoft's latest quarter?
Xbox content and services revenue fell 2 percent, while hardware revenue dropped 14 percent year-over-year, Microsoft reported on October 28, 2026.
What period did the quarter cover?
The fiscal first quarter covered July, August and September.
Why did Devices and Consumer costs decline?
Microsoft said operating expenses fell 3 percent driven by Xbox, and cost of revenue fell 8 percent driven by lower amortization of intangible assets from the Activision acquisition.