Microsoft has published its latest financial results, with Xbox revenue down 7% for the full year and 10% in the fourth quarter.
Growth in Game Pass partially offset annual declines, but hardware revenue dropped 29% due to reduced console sales.
Here’s what you need to know:
The numbers
For the three months ended June 30, 2026:
- Revenue: $90 billion (up 18% year-on-year)
- Net income: $35.8 billion (up 31% year-on-year)
- More Personal Computing (incl. Xbox) revenue: $12.9 billion (down 4% year-on-year)
The highlights
Microsoft CEO Satya Nadella described the company’s Q4 results as a “very strong close to what was a record fiscal year.”
“Going forward, we have two goals. First, ensuring AI empowers every person, amplifying their agency and ambition,” said Nadella. “Second, empowering every organisation to build their own continuous learning loop and ensuring that they don’t outsource their core IP.”
Microsoft’s overall revenue was driven by its Cloud segment, which increased 27% to $59.3 billion.
Its Intelligent Cloud services also rose 32% to $39.3 billion, while Productivity and Business Processes grew 14% to $37.8 billion.
The 4% revenue decrease in More Personal Computing was attributed to a 10% drop in Xbox content and services.
The firm noted that during the same period last year, Xbox “benefited from strong first-party content performance.”
Hardware revenue declined 13% and is projected to decrease further year over year.
For its full-year results, Microsoft posted an 18% increase in total revenue of $331.8 billion. Operating income rose 21% to $155.2 billion, while net income increased 22% to $133.7 billion.
Following Microsoft’s fourth-quarter and full-year results, it undertook layoffs affecting 4,800 roles across its organisation, resulting in a 2.1% cut to its global workforce.
“We are making the necessary decisions required across our content portfolio, platform, and operations to reset the business for long-term growth,” said Nadella.
“We have the best IP in the industry, and talented studios around the world, and believe we can bring these strengths together and expect to return the business to growth in fiscal 2027.”
This included 1,600 positions at Xbox, with further reductions planned throughout FY27, totaling 3,200 roles.
As part of the restructuring, four studios transitioned to new management. Double Fine Productions and Compulsion Games became independent, while Undead Labs and Ninja Theory began negotiations for new ownership.
Arkane Leon began consultation proceedings to “review potential strategic options.”
Yesterday, Double Fine announced it cut 23 roles following its complete separation from Xbox earlier this week.
“Our business is changing because the world around it is changing,” said Microsoft EVP and chief people officer Amy Coleman.
“The way technology is built, deployed, and used is transforming faster than at any point in my time here. Our customers’ needs are shifting, the business models that serve them are shifting, and that means the work itself – what we do, where we focus, and how we’re organised – has to transform too.”