The ray of sunshine that glowed above Xbox earlier this year has all but dissipated after its cost-cutting, job-ending ‘Reset.’ But positive tidings may not come until 2027, according to Microsoft’s leadership. Nobody tell Xbox that next year may be an even worse time for gaming hardware and the people who make it.
Here are the numbers according to the latest financials: Microsoft’s More Personal Computing revenue, which includes Xbox, hit $12.9 million in revenue, down 4% year-over-year. That’s partially due to Surface devices seeing sales declines, but Xbox has also proved a major driver of losses over the past few years. Overall Xbox revenue was down 7%, or $1.7 billion, driven by “Xbox content and services and Xbox hardware.”
On the software side, content and services were down 10% compared to last year, mostly because Xbox had more hits in its last fiscal year, which ends in June. Meanwhile, Xbox hardware revenue was down 29%. That may not be as bad as some analysts expected, but it’s consistent with Xbox hardware revenue declines over the past year. Fewer people are buying consoles, not the least because each device is now way more expensive than it was at launch in 2020—thanks to memory prices driven by the demand for AI hyperscalers.
The irony is palpable. Microsoft is one of many big tech firms building the AI infrastructure that is simultaneously murdering its hardware brands. That’s not something the company can ever admit. In his earnings call with investors and analysts, Microsoft CEO Satya Nadella said:
“We are making the necessary decisions required across our content portfolio, platform, and operations to reset the business for long-term growth. We have the best IP in the industry and talented studios around the world and believe we can bring these strengths together and expect to return the business to growth in fiscal 2027.”
That’s a fine hope, though it lacks specific plans on how Xbox can again return to its former glory. Microsoft has multiple big launches planned for this year, and it just launched Halo: Campaign Evolved across both Xbox and PlayStation consoles. Xbox reversed plans to give Gears of War: E-Day a place in Sony’s gaming brand, and now it’s exclusive to Xbox Series consoles and PC. The company released a multiplayer trailer for the game on Thursday, as if to say, “Here’s your reason you should buy an Xbox.”
The real problem Microsoft faces is how it can sell consoles for what will inevitably become the biggest game of the year. Grand Theft Auto VI is set to arrive Nov. 19 and costs $80. The game won’t be available on any other consoles than the Xbox Series S, Series X, PlayStation 5, and PS5 Pro. This should be the biggest moment for the entire console generation, and to play the game at its best, you’ll need to spend at least $750 for an Xbox Series X digital edition or $600 for a PS5 without the optical drive. Which one do you imagine most players would choose?
What exclusive content does Xbox have on its docket for the next year? Xbox has No More Room in Hell 2 coming Aug. 11 and a Stalker 2: Cost of Hope expansion coming Aug. 20. The new Gears should be available by Oct. 6. Most other major releases have vacated release dates to avoid the rampaging elephant that is GTA. The new Fable game is supposed to arrive by Feb. 23 next year after recent delays.
By then, Xbox may finally showcase its next-gen console, Project Helix. Essentially, all of Xbox’s future hopes ride on this new hardware ecosystem it’s building, one that combines PCs and consoles. By 2027, RAM prices may get even worse. Even with the promise of exclusive content, Xbox will then struggle to hit a price point that makes sense for most gamers. The only thing that’s clear now is 2027 will be Xbox’s make-it-or-break-it year.
