Xbox Content & Services Revenue Sees Slight Increase In Q1 2026, Hardware Drops Almost 30%

Microsoft has released its financial results for Q1 of the 2026 fiscal year – and just like recent quarters, content and services are on the up, but hardware sales are drastically down.

The Xbox owner says that its content and services revenue increased by 1% year-over-year, while its hardware sales dropped 29% on the same time last year. This has become a common story in recent years as Microsoft continues to shift its gaming focus away from pure console sales.

“Xbox hardware revenue decreased 29% driven by lower volume of consoles sold,

Xbox content and services revenue increased 1% on a strong prior year comparable with growth in Xbox Game Pass and third-party content, offset in part by a decline in first-party content.”

That “decline in first-party content” compares to a very strong period during the first half of 2025 – where the likes of Avowed, Oblivion Remastered and DOOM: The Dark Ages all launched, while Forza Horizon 5 also moved over to PS5 with impressive results. As you can see, that first-party drop was made up for with growth in “third-party content” over the last three months.

As for hardware, it’s the same old story this generation with Xbox. On top of that declining trend, Microsoft has made two additional hardware price bumps in the last few months – which is also likely to deter customers as Xbox Series X|S continues to be slowly phased out on the march towards the next generation.