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

Microsoft’s latest quarter showed Xbox weakness, with content and services revenue down 10% and hardware sales down 13%.

At the same time, Microsoft’s cloud, productivity, and AI businesses posted strong growth and helped lift overall earnings to $90 billion.

The company is restructuring Xbox with layoffs, studio spinoffs, pricing changes, and higher console prices.

Microsoft still expects Xbox to return to growth in fiscal 2027, but the company’s momentum is clearly coming from cloud and AI.