“The Xbox handhelds have arrived, perhaps just in time to save sinking console sales. Microsoft reports Xbox console sales were down 29 percent (in revenue) in the summer quarter, the company’s fiscal first quarter of 2026. Q1 was sandwiched between a pair of Xbox-console price hikes in May and October. Fortunately, Xbox content and services”, — write: www.hollywoodreporter.com
Microsoft reports Xbox console sales were down 29 percent (in revenue) in the summer quarter, the company’s fiscal first quarter of 2026. Q1 was sandwiched between a pair of Xbox-console price hikes in May and October. Fortunately, Xbox content and services revenue ($5.5 billion for the quarter) did not follow the console decline — that line item actually grew by one percent from July to September 2025. All told, gaming revenue decreased $113 million in the quarter, or by two percent.
Xbox console sales figures dropped 22 percent in the prior quarter, fiscal Q4 of 2025. We’re finding that increased console prices are not offsetting the decrease in units moved.
The group’s popular Game Pass service saw its own significant price increase the day after Q1 2026 closed. We’ll find out in three months if the larger price tag there significantly offsets potential subscription cancellations.
Here to help are the Xbox ROG Ally ($599.99) and Xbox ROG Ally X ($999.99), the handheld devices that were released on Oct. 16 — their initial sales figures will be captured within the current quarter’s financials. The devices are actually manufactured by ASUS; Xbox partnered with the handheld company on console-player-friendly portable PCs.
Thankfully, Xbox is a pretty minor part of Microsoft’s overall business. A zoomed-out view shows the company’s Q1 2026 revenue of nearly $78 billion (up 18 percent), operating income of $38 billion (up 24 percent) and net income nearing $28 billion (up 12 percent) on a GAAP basis and almost $31 billion (up 22 percent) on a non-GAAP basis. Earnings per share were $3.72 (GAAP, up 13 percent) and $4.13 (non-GAAP, up 23 percent).
A lot more than video games goes into those numbers.
“Our planet-scale cloud and AI factory, together with Copilots across high value domains, is driving broad diffusion and real-world impact,” said Satya Nadella, chairman and CEO of Microsoft. “It’s why we continue to increase our investments in AI across both capital and talent to meet the massive opportunity ahead.”
“We delivered a strong start to the fiscal year, exceeding expectations across revenue, operating income, and earnings per share,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “Continued strength in the Microsoft Cloud reflects the growing customer demand for our differentiated platform.”