Xbox revenue drops 10 percent as Microsoft’s cloud and AI business surges

# Xbox revenue drops 10 percent as Microsoft’s cloud and AI business surges Source: [https://www.theverge.com/tech/972738/xbox-revenue-microsoft-earnings-q4-2026](https://www.theverge.com/tech/972738/xbox-revenue-microsoft-earnings-q4-2026) [Skip to main content](https://www.theverge.com/tech/972738/xbox-revenue-microsoft-earnings-q4-2026#content) Cloud revenue soared to $59 billion, while Xbox services and hardware sales took a hit\. Cloud revenue soared to $59 billion, while Xbox services and hardware sales took a hit\. by Jul 29, 2026, 8:26 PM UTC   Illustration: The Verge [](https://www.theverge.com/authors/emma-roth) Emma Roth is a news writer who covers the streaming wars, consumer tech, crypto, social media, and much more\. Previously, she was a writer and editor at MUO\. Xbox is having yet another tough quarter, as revenue from content and services like its Game Pass subscription dipped 10 percent over the past few months\. At the same time, Xbox hardware sales declined 13 percent, according to[Microsoft’s fourth\-quarter earnings report released](https://www.microsoft.com/en-us/investor/earnings/FY-2026-Q4/press-release-webcast)on Wednesday\. The news comes just weeks after Xbox head Asha Sharma announced[a “reset” plan for Xbox that included](https://www.theverge.com/games/948142/microsoft-xbox-layoffs-reset-asha-sharma)sweeping layoffs and the spinoff of four games studios,[including*South of Midnight*developer](https://www.theverge.com/games/961749/xbox-layoffs-compulsion-double-fine-indie)Compulsion Games and*Psychonauts*creator Double Fine Productions\. Sharma has also made some other big changes to Xbox, including[lowering GamePass prices](https://www.theverge.com/news/915928/microsoft-xbox-game-pass-ultimate-price-drop), testing free,[ad\-supported cloud gaming](https://www.theverge.com/games/969969/xbox-testing-ad-supported-streaming), and making[*Gears of War: E\-Day*and*Clockwork Revolution*](https://www.theverge.com/report/945639/xbox-exclusives-strategy-complicated-confusing)Xbox exclusives\. Xbox also plans to raise the prices of its[consoles by $100 and more starting August 1st](https://www.theverge.com/games/957042/xbox-price-increase-memory-shortage)\. As Microsoft[ramps up efforts in AI](https://www.theverge.com/podcast/944138/microsoft-ai-ceo-mustafa-suleyman-superintelligence-agi-openai-automation), its cloud business has pushed the company’s overall revenue to $90 billion\. Microsoft Cloud revenue soared 27 percent to $59\.3 billion over the past few months, while revenue from its productivity business, which includes services like Microsoft 365 and LinkedIn, spiked 14 percent to $37\.8 billion\. Microsoft 365 Copilot also reached more than 30 million paid seats and Azure revenue hit more than $100 billion for the first time\. But Xbox wasn’t Microsoft’s only segment on the decline\. The company’s Windows OEM and devices segment decreased 7 percent “driven by lower PC market demand\.” Microsoft took the wraps off a new Surface device with[RTX Spark, Nvidia’s new Arm\-based processor](https://www.theverge.com/tech/940584/microsoft-surface-laptop-ultra-nvidia-rtx-spark-pictures)in June, and is also starting to make[quality\-of\-life changes](https://www.theverge.com/tech/965090/microsoft-windows-11-search-menu-ads)to Windows 11 as it aims to[regain user trust](https://www.theverge.com/tech/870045/microsoft-windows-11-issues-rebuilding-trust-notepad)\. **Follow topics and authors**from this story to see more like this in your personalized homepage feed and to receive email updates\. - Emma Roth ## The Verge Daily A free daily digest of the news that matters most\.