Xbox revenue drops 10 percent as Microsoft’s cloud and AI business surges

Xbox is having yet another tough quarter, as revenue from content and services like its Game Pass subscription dipped 10 percent over the past few months. At the same time, Xbox hardware sales declined 13 percent, according to Microsoft’s fourth-quarter earnings report released on Wednesday.

“When it comes to Xbox, we are making the necessary decisions required across our content portfolio, platform, and operations to reset the business for long-term growth,” Microsoft CEO Satya Nadella said during an earnings call. He added that Microsoft expects “to return the business to growth in fiscal 2027.”

As Microsoft ramps up efforts in AI, its cloud business has pushed the company’s overall revenue to $90 billion. Microsoft Cloud revenue soared 27 percent to $59.3 billion over the past few months, while revenue from its productivity business, which includes services like Microsoft 365 and LinkedIn, spiked 14 percent to $37.8 billion. Microsoft 365 Copilot also reached more than 30 million paid seats and Azure revenue hit more than $100 billion for the first time.

Update, July 29th: Added a statement from Satya Nadella.