In Microsoft's latest financial results from Q4 2026, the tech giant reported that Xbox content and services saw a 10% decline in revenue compared to the previous year, while Xbox hardware revenue declined by 13% YoY. This follows Xbox CEO Asha Sharma's earlier warning that Xbox revenue was plummeting, prompting intense layoffs in early July.

Microsoft CEO Satya Nadella stated the company has adjusted its strategy across Xbox's publishing and hardware business to return the gaming division to growth in fiscal 2027. "We are making the necessary decisions required across our content portfolio platform and operations to reset the business for long-term growth," Nadella said, citing the industry's best IP and talented studios worldwide.

Sharma's "Xbox reset" includes 3,200 staff layoffs over the next year and changes to exclusive game handling. Microsoft also announced a steep price hike for Xbox consoles in August to address hardware market challenges, and may reduce subsidies for the next-gen Helix console, already expected to carry a premium price tag.