Xbox Hardware Revenue Drops 33% in Microsoft Earnings

Microsoft reports a 33 percent decline in Xbox hardware revenue in its earnings released Wednesday, even as total revenue reaches $82.9 billion.

Xbox content and services revenue falls 5 percent. The gaming division faces executive turnover, including the retirement of Xbox chief Phil Spencer and departure of former Xbox president Sarah Bond. Former Microsoft CoreAI head Asha Sharma now leads, having lowered Xbox Game Pass prices to rebuild the unit's identity.

Microsoft's cloud business generates $54.5 billion in revenue, up 29 percent year-over-year. Azure and other cloud services rise 40 percent. "We are focused on delivering cloud and AI infrastructure and solutions that empower every business to eval-max their outcomes in the agentic computing era," CEO Satya Nadella states. The AI business hits a $37 billion annual run rate, up 123 percent year-over-year.

Microsoft 365 Copilot paid seats increase from 15 million to 20 million. Consumer cloud revenue grows 33 percent, commercial 19 percent, with new "vibe working" features in Excel, Word, and PowerPoint. Windows OEM and devices revenue dips 2 percent amid a global memory shortage prompting Surface price hikes; new Surface Pro and Laptop models launch soon.