Xbox console sales down by a third as first party games underperform too

The 25th anniversary year of Xbox is already off to a bleak start, with declining game and hardware sales expected to get even worse in the coming months.

While Nintendo will be celebrating the anniversaries of The Legend Of Zelda and Pokémon this year, 2026 also marks the 25th anniversary of the entire Xbox brand, in November. And yet it’s difficult, if not impossible, for Xbox fans to feel particularly celebratory at the moment.

It says a lot that one of the ways Microsoft is planning to celebrate the occasion is by releasing its Halo: Combat Evolved remake on PlayStation 5.

As such, it’s not a surprise that Xbox console sales keep falling, but new data shows that even with the money coming in from PlayStation 5 ports, Microsoft’s games are making increasingly less money.

Microsoft recently shared its financial results for the second quarter of the 2026 fiscal year, which covers the months of October to December 2025. Overall, the company made $81.3 billion (about £59 billion) – a 15% increase compared to the same period in 2024 – so it’s not as if Microsoft is in dire straits or anything.

If you look at the gaming division, though, things are far less rosy. Gaming revenue is down by 9%, which isn’t great when this time last year, the $6.6 billion it made then was already less than what it made the year before.

According to chief financial officer Amy Hood, the gaming division’s performance that quarter is ‘below expectations driven by first party content with impact across the platform.’ Basically, Xbox’s first party output hasn’t sold well enough.

This doesn’t bode well for any of the brand new games that launched during that quarter, which includes:

• Double Fine’s Keeper, which is only on Xbox Series X/S and PC
• Team Ninja and PlatinumGames’ Ninja Gaiden 4, which isn’t made by a first party developer but was published by Xbox Game Studios
• Obsidian Entertainment’s The Outer Worlds 2, which saw a multiplatform release and was clearly meant to be Microsoft’s big Christmas game
• Call Of Duty: Black Ops 7 is already known to have underperformed and while there’s no specific sales figures, last year is the first year that Battlefield outsold the franchise.

Hood went on to admit that things aren’t expected to get any better by the end of the third quarter – January to March 2026 – saying, ‘We expect revenue to decline in the mid-single digits against a prior year comparable that benefitted from strong content performance, partially offset by growth in Xbox Game Pass.’

Microsoft has no big games scheduled for this quarter, only the PlayStation 5 port of Obsidian’s other 2025 role-player, Avowed, and the full release of early access beat ‘em-up Towerborne.

This means that the likes of Forza Horizon 6, the Fable reboot, and the aforementioned Halo remake face even more pressure to perform well.

As for Xbox hardware revenue, it’s declined by 32%, which could’ve been even worse had Microsoft not raised the prices.

When you take into account how console sales have been constantly dropping for several years, the actual sales figures must be ludicrously low by now. And with Hood saying those numbers are expected to drop again this year, you have to wonder how much longer Microsoft will bother producing new Xbox Series X/S consoles.

Xbox consoles have been out of stock for months on Microsoft’s official website in some European countries, like Spain and Italy. The Netherlands website doesn’t even have a console section.

New and refurbished consoles are still available on the UK and US websites, and a quick Google search shows several retailers have Xbox consoles in stock, but it’s telling that Microsoft had to publicly deny rumours of US retailers like Target and Walmart pulling consoles from sale (per Windows Central).

None of this exactly bodes well for Microsoft’s future hardware plans. That’s no doubt why the next Xbox console is being described as more akin to a PC, and likely very expensive.

Unfortunately for Microsoft, Valve plans to offer almost the exact same thing with its revamped Steam Machine. What’s more, that’s launching this year, while the new Xbox may not even be out this decade.

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