Xbox hardware revenue decreased by 25 percent during fiscal year ended June 30, 2025, but Microsoft has indicated there is cause for optimism after it became the top publisher on PlayStation during Q4.
The U.S. tech giant’s latest fiscal results confirm Xbox hardware sales are in decline, although annual gaming revenue increased by 9 percent year-on-year to $23.5 billion. Annual Xbox content and services revenue increased 16 percent year-on-year, driven by the impact of the company’s massive Activision Blizzard merger.
As laid out in Microsoft’s latest 10-K filing, the company emphasized that Xbox revenue is largely impacted by subscriptions and sales of first and third-party content.
“Growth of our Gaming business is determined by the overall active user base through Xbox enabled content, availability of games, providing exclusive game content that gamers seek, the computational power and reliability of the devices used to access our content and services, and the ability to create new experiences,” stated the company.
During a quarterly earnings call, Microsoft CEO Satya Nadella said Xbox (alongside LinkedIn) is one of the company’s two consumer businesses with “massive end user reach.”
He explained the company’s gaming business now has over 500 million monthly active users cacross platforms and devices and said Xbox has made significant inroads on rival platforms after choosing to bring major first-party franchises to PlayStation and Nintendo Switch.
“We are now the top publisher on both Xbox and PlayStation this quarter, with the successful launches of Forza Horizon 5 and Oblivion Remastered,” said Nadella.
Meme-laden movie adaptation drives Minecraft to record quarter
He added that 50 million people have played Call of Duty: Black Ops 6, resulting in over 2 billion hours of playtime worldwide. Meanwhile, Minecraft benefited from the release of A Minecraft Movie to deliver record monthly active usage and revenue during Q4.
Nadella also confirmed that Xbox Game Pass annual revenue totalled nearly $5 billion for the first time during the last fiscal year—and the chief exec indicated there is more to come from its gaming business.
“We have nearly 40 games in development, so much, much more to come,” he added. “We surpassed over 500 million hours of game play streamed via the cloud this year.”
Microsoft’s latest fiscal results were published roughly a month after the company announced it would be making roughly 12,000 people redundant, including a significant number within its video game division.
The company said those layoffs will enhance efficiency and “position the company and teams for success in a dynamic marketplace.”
Discussing those cuts, an Xbox spokesperson told Game Developer it intends to “empower employees to spend more time focusing on meaningful work by leveraging new technologies and capabilities” while eliminating redundancy.
Microsoft still hasn’t confirmed the full scale of the cutbacks, but reports indicate there have been widespread layoffs and project cancellations at internal studios such as King, ZeniMax Media, and Rare. The company also reportedly shuttered The Initiative and scrapped its Perfect Dark reboot.
Despite claiming the layoffs will benefit its development teams in the long-term, some Xbox workers recently told Game Developer they will have the opposite effect and slammed Microsoft over its chaotic and “inhumane” handling of the process.
