Xbox hardware revenue falls 14%, and Asha Sharma says demand is outrunning supply

Xbox hardware brought in 14% less money from July through September than a year earlier, Microsoft reported on Wednesday, October 28. Content and services, the bucket that covers game sales, in-game purchases and subscriptions such as Game Pass, fell 2%, or 1% once currency swings are stripped out, according to Microsoft's earnings release.

There was no word of new console or Game Pass prices. Asha Sharma, who runs Xbox, blamed the hardware slide on supply: "Console sales remain constrained by supply, with more demand than consoles available."

Which quarter this is

Microsoft's fiscal year runs from July to June, so the period it calls the first quarter of fiscal 2027 is July, August and September 2026, measured against the same three months of 2025. The figures track revenue only. Microsoft does not say how many consoles it sells.

Pricier consoles, and fewer of them

Series X and Series S prices went up by as much as $150 on August 1, so for two of the quarter's three months every console cost more than it did a year ago. Hardware revenue still dropped 14%, which points to an even steeper fall in units, though Microsoft gives no number. Circana's US tracking through August had already shown Xbox hardware units down 33% for the year.

Sharma said Microsoft is working to get more consoles to players, partly by expanding its certified refurbished program, which resells returned or used machines after the company inspects them. She did not say what is holding back supply or which markets are short. CFO Amy Hood did not break out hardware on the investor call either, but she said hardware revenue will decline again in October through December compared with the same stretch of 2025.

Buying an Xbox for GTA VI

GTA VI launches November 19, and Microsoft CEO Satya Nadella reminded investors that it reaches Xbox next month. Anyone planning to pick up a console for it now has a warning from Microsoft itself: fewer machines than buyers, and lower hardware revenue expected through December. Check retailer stock early rather than in launch week, and leave time for the download size and preload.

Refurbished units are one fallback. When we checked on October 30, Microsoft's store listed a certified refurbished Series X at $649.99 and a Series S at $399.99, while the refurbished Series X Digital Edition, at $599.99, was marked out of stock. Each comes with a 90-day limited warranty.

Game Pass brought in less

Hood said content and services slipped because third-party content, meaning games and purchases from other publishers in the Xbox store, sold less and Game Pass revenue fell. Growth in Microsoft's own games, Activision Blizzard titles included, made up part of the gap, and Nadella pointed to a record quarter for Minecraft in both engagement and revenue. Sharma added that Xbox's PC revenue grew by double digits, without giving a figure.

For October through December, Hood expects content and services to grow in the "mid-to-high single digits," driven by the timing of first- and third-party releases. Nadella named Modern Warfare 4, out since October 23, and GTA VI. Hood expects that growth to cool from January.

Game Pass changes already announced are going ahead. Starting in November, cloud play in the subscription comes with a monthly hour cap, and Microsoft is already testing cloud hours sold without a subscription. The earnings materials do not tie either move to the Game Pass revenue decline.