Xbox Console Sales Down 32%, Gaming Revenue Drops 9%
The pattern of Microsoft excelling while Xbox underperforms persisted in Q2 FY 2026.
Microsoft has unveiled its financial results for the second quarter of FY 2026, continuing the familiar pattern of the company performing exceptionally well overall, and, at the same time, its gaming division remaining the proverbial black sheep and being the only department described with the word "decreased" in Microsoft's press release.
Microsoft
According to the company, the primary driver behind the gaming segment's decline is lower Xbox console sales, which, after falling 11% in FY22, 13% in FY23, 42% in FY24, 22% in FY25, and 29% in FY26 Q1, have now dropped another 32% year-over-year. Combined with a 5% YoY decline in Xbox content and services revenue, Microsoft's gaming revenue fell $623 million, or 9%, compared to the same period last year.
As mentioned above, aside from its underperforming gaming division, Microsoft as a whole is experiencing strong growth, reporting Q2 FY 2026 revenue of $81.3 billion, up 17%, and operating income of $38.3 billion, up 21%.
Revenue in the Productivity and Business Processes department, which includes Microsoft 365, LinkedIn, and Dynamics 365, reached $34.1 billion, a 16% increase, while Azure and other cloud services grew 39%. Microsoft Cloud revenue totaled $51.5 billion, rising 26%.
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