Microsoft pulled in $90 billion in corporate revenue this quarter, fueled by massive cloud growth. But Xbox is dragging behind. Gaming revenues fell 10% this quarter following deep layoffs and studio closures.
The gaming division reported total revenue of $4.98 billion, representing the lowest quarterly performance for Xbox since the early months of the 2024 fiscal year. According to the company corporate filing, hardware sales dipped 29% over the entire fiscal year. Xbox Series X console prices recently jumped to $750, which represents a 33% increase from the original launch price. New CEO Asha Sharma recently confirmed a restructuring plan that involves cutting 1600 more jobs and spinning off multiple first party studios, including creators of Psychonauts and South of Midnight.
The rest of Microsoft is operating in a different reality. The company reported overall net income of $35.8 billion. Corporate leaders attribute the gains to surging cloud and AI demands, pointing out that Azure revenue surpassed $100 billion for the first time. During the earnings call, CEO Satya Nadella highlighted that Microsoft 365 Copilot reached 30 million paid users. This performance offsets the massive $70 billion acquisition of Activision Blizzard, which continues to impact Xbox profit margins.
The ongoing cuts have damaged relations with the development community. Game developers and fans are criticizing the decision to close smaller creative groups to focus solely on massive intellectual properties like Fallout. Despite the backlash, Microsoft CFO Amy Hood estimated that gaming content and services revenue will continue to slide by mid single digit percentages in the coming quarters. Chief executive Satya Nadella remains optimistic, claiming that the company will return the gaming division to growth in the 2027 fiscal year.
