Xbox hardware sales decline as Game Pass sets quarterly revenue recordXbox hardware sales decline as Game Pass sets quarterly revenue record

Microsoft has once again reported a downturn in Xbox hardware revenue.

In its latest fiscal report, the U.S. company explained Xbox hardware revenue declined by 29 percent year-over-year during Q2 and said that dip was "driven by lower volume of consoles sold." It follows a similar decline in Q1.

Xbox content and services revenue increased by 2 percent thanks to growth in Xbox Game Pass. Overall gaming revenue within the More Personal Computing segment totalled $530 million for the quarter, representing a year-over-year decrease of 7 percent.

Discussing those results in an earnings call, Microsoft CEO Satya Nadella said the company is focused on improving the profitability of its gaming business to deliver long-term growth. Those remarks come after Microsoft laid off over 2,550 developers in 2024 and shuttered multiple internal studios.

He noted that Black Ops 6–the second Call of Duty title to launch under the Microsoft banner following its $68.7 billion merger with Activision Blizzard–was the top-selling title on Xbox and PlayStation during Q2. Nadella stated the shooter "saw more players in its launch quarter than any other paid release in franchise history."

Xbox hardware in decline but Microsoft touts 'strong momentum' in other areas

Remarking on the performance of December 2024 release Indiana Jones and the Great Circle, developed by ZeniMax studio MachineGames, Nadella said the Nazi-punching simulator has been played by over 4 million people. It's unclear what percentage of those players purchased the title or chose to access it through Xbox Game Pass.

Nadella explained Microsoft continues to see "strong momentum" within its Xbox Cloud Gaming business with a record 140 million hours streamed during the quarter. In addition, he revealed Xbox Game Pass set a new quarterly revenue record after growing its PC subscriber base by over 30 percent.

Discussing the future of the subscription service, Nadella said Microsoft is committed to "driving fully-paid subscribers across endpoints."

Microsoft continues to position its primary gaming business as one that revolves around "content and services" as opposed to hardware, and with Xbox boss Phil Spencer recently refusing to ring fence first-party software, it seems likely we'll see more and more Xbox Game Studios titles heading to rival platforms in the future.