Microsoft reported its overall revenue for the third quarter of fiscal year 2026, spanning January to March, rose 18% to reach $82.9 billion despite a sharp decline in its gaming division [1]. Xbox hardware revenue fell 33% compared to the same period last year, largely due to two price increases for Xbox Series X and S consoles in the US during the previous six months [1].
Xbox content and services revenue also declined by 5% year-on-year in Q3 FY2026 [1]. Despite these revenue drops, Microsoft CEO Satya Nadella said the company achieved new records for monthly Xbox active users and game streaming hours during the quarter, reflecting strong engagement even as revenues slipped [1]. Nadella stated, "We know we have work to do to earn every player today and into the future," and emphasized a focus on "foundational work required to win back fans and strengthen engagement across Windows, Xbox, Bing, and Edge" [1].
Asha Sharma, Microsoft’s newly appointed head of Xbox, acknowledged that player and revenue growth had not met the company’s ambitions. She said, "While we have made progress expanding the business and our margins, player and revenue growth has not yet met our ambition. We know we have work to do to earn every player today and into the future" [1].
In late 2025, Microsoft raised prices twice for the Xbox Series X and S consoles in the US, which the company linked to macroeconomic factors [1]. In early May 2026, Microsoft reduced subscription prices for Xbox Game Pass Ultimate and PC Game Pass in the US and UK. The price for Xbox Game Pass Ultimate is now $22.99 per month in the US [1].
The company’s focus remains on serving its core Xbox fan base better and prioritizing quality to strengthen engagement as it works to reverse the recent declines. The price adjustments for Game Pass subscriptions came shortly after the end of the quarter, marking an effort to attract and retain users.
