Xbox hardware sales drop again, but Microsoft sees overall gaming revenue rise in Q3

Microsoft has reported its financial results for the third quarter of its 2025 fiscal year, revealing continued growth in its gaming division despite another decline in Xbox hardware revenue.

The details:

The company posted $70.1 billion in revenue and $25.8 billion in net income for the quarter, marking year-over-year increases of 13 and 18 percent, respectively. While those gains were primarily driven by Microsoft’s Cloud and Office businesses, the Xbox division contributed to the company’s positive results. Gaming revenue rose five percent compared to the same period last year, with content and services revenue, which includes Game Pass and first-party titles, up by eight percent. Microsoft said it was the top-grossing publisher on both Xbox and PlayStation during the quarter.
Although Avowed launched during the period, Microsoft credited the performance largely to the continued success of Call of Duty and Minecraft. Game Pass subscriptions also increased, though Microsoft hasn’t shared updated figures since announcing it had surpassed 34 million subscribers in February.
On the hardware front, Xbox console sales declined by six percent year-over-year, continuing a downward trend. The dip comes as Microsoft doubles down on a platform-agnostic approach to its gaming business, expanding Game Pass and cloud offerings across devices, including Meta Quest headsets and smart TVs.
Despite the shift in focus, Microsoft has stressed that it remains committed to the console market. A new Xbox Series X/S revision is in development, and reports suggest that the company is targeting a 2027 release window for its next-generation system. Xbox president Sarah Bond has said the upcoming hardware will focus on “delivering the largest technical leap that you will have ever seen in a hardware generation.”

More Microsoft news:

Microsoft Gaming CEO Phil Spencer has confirmed that Xbox will support the Nintendo Switch 2, describing Nintendo as a "great partner" and an "important part" of the company's future.
Asus has released a new teaser for its next generation of handheld gaming PCs, but it appears to be related to Xbox's handheld plans, with the company responding to the trailer.