Xbox revenue falls as Microsoft Q3 shows hardware down 33%

Xbox revenue declined in Microsoft’s third quarter of fiscal 2026, covering January through March 2026. Hardware revenue fell 33% year-over-year. Content and services revenue declined 5% year-over-year (7% in constant currency). Total gaming revenue was $5,341 million, down 7% from $5,721 million in Q3 FY2025.

Gaming results are reported within Microsoft’s More Personal Computing segment, which reported revenue of $13.2 billion, down 1% year-over-year (3% in constant currency). The company’s Form 10-Q attributed the gaming revenue decline primarily to a tough comparison with the prior-year quarter and continued weakness in hardware. Xbox hardware revenue had also fallen 32% in Q2 FY2026.

CFO Amy Hood had guided to a mid-to-high single-digit decline in total gaming revenue for the quarter and a mid-single-digit decline in content and services; the quarter’s results landed at the lower end of that forecast.

Microsoft reported total company revenue of $82.9 billion for the quarter, up 18% year-over-year. Operating income was $38.4 billion and GAAP net income was $31.8 billion. Microsoft Cloud revenue totaled $54.5 billion, up 29%, and Azure and other cloud services grew 40%.

Satya Nadella said the company’s AI business had crossed a $37 billion annual revenue run rate, representing 123% growth year-over-year. CFO Amy Hood stated the company “delivered results that exceeded expectations across revenue, operating income, and earnings per share.”

The company returned $10.2 billion to shareholders through dividends and share repurchases during the quarter.

In April 2026 Microsoft announced a price cut for Xbox Game Pass Ultimate to $22.99 per month. The change took effect after the reporting period and will be reflected in Q4 FY2026 results.

Microsoft said it will provide forward-looking information during its earnings conference call on April 29, 2026.