Microsoft Gaming Revenue Rises in Q4 2025, But Xbox Console Sales Drop Sharply

Image Credit: Elder Schroll 4 Oblivion Remastered / Doom the dark ages / Microsoft / Xbox

Microsoft has released its Q4 FY25 earnings, and the results are a mixed bag for the company’s gaming division. While software and services continue to thrive—fueled by major game launches and subscription growth—hardware sales took a steep dive.

Between April 1 and June 30, 2025, Microsoft’s gaming revenue hit $5.5 billion, marking a 10% increase year-over-year. The boost was largely driven by Xbox content and services, which rose 13% compared to the same period last year. This includes revenue from game sales, Xbox Game Pass, and add-on content.

However, that success wasn’t mirrored on the hardware side. Revenue from Xbox console sales—including the Xbox Series X and S—plunged 22%, a sharper decline than the previous quarter’s 6% dip. This continues a concerning trend for Microsoft’s console business, even as the rest of its gaming ecosystem flourishes.

Some of the quarter’s momentum came from strong game releases. First-party titles like South of Midnight, The Elder Scrolls IV: Oblivion Remastered, and DOOM: The Dark Ages played a key role, alongside critical third-party hits like Clair Obscur: Expedition 33.

The company also saw sustained engagement across major franchises such as Minecraft, Call of Duty, Halo, and World of Warcraft.

Microsoft CEO Satya Nadella highlighted several milestones during the company’s earnings call. He emphasized that Microsoft is now the top publisher on both Xbox and PlayStation, with six of the ten best-selling PlayStation 5 games this quarter being Microsoft-published, including Forza Horizon 5 and Indiana Jones and the Great Circle. (Via Variety)

Nadella also noted that Call of Duty: Black Ops 6 has already attracted over 50 million players, logging more than 2 billion hours played.

Game Pass, Microsoft’s gaming subscription service, continued to show growth for the third consecutive quarter. Annual revenue for Game Pass nearly reached $5 billion, according to Microsoft.

Despite the financial wins, the shadow of layoffs loomed large over the quarter. As per reports, around 9,000 employees were laid off at Microsoft between late June and early July, many of them from Xbox-related teams. High-profile cancellations included Perfect Dark, Everwild, and an unannounced title from ZeniMax Online Studios, which had reportedly impressed even Xbox leadership.