Xbox CEO Asha Sharma, who took the job less than 3 months ago, says 'player and revenue growth has not yet met our ambition' as Microsoft gaming continues to slide
Microsoft released its Q3 FY26 earnings report yesterday, and the news on the Xbox is not entirely sunshine and lollipops. The company ate a 7% ($380 million) decrease in gaming revenue in the quarter, driven by a 5% year-over-year decline in Xbox content and services revenue and a 33% drop in Xbox hardware revenue.
That's not catastrophic, but it was enough to prompt a public reaction from new Xbox CEO Asha Sharma. "While we have made progress expanding the business and our margins, player and revenue growth has not yet met our ambition," Sharma wrote on X. "We know we have work to do to earn every player today and into the future."
CEOs are paid to say upbeat things about downbeat situations, but even knowing that, Sharma's statement hits me as a bit overwrought—or maybe just unnecessary and misplaced. She only took the CEO job a little over two months ago, and given the near-universal agreement that Xbox has been in decline for some time now, I'd be very surprised indeed if Microsoft's ambitions for player and revenue growth had already been met. Microsoft literally just gave up on the "This is an Xbox" campaign last month. It takes a while to turn these ships around, you know.
Microsoft CEO Satya Nadella came off as a little more circumspect about the whole thing in his own comments during the company's earnings call, saying Microsoft is "doing the foundational work required to win back fans and strengthen engagement across Windows, Xbox, Bing, and Edge," and that the Xbox team in particular "is recommitting to our core fans and players, and shaping the future of play." He also noted that the quarter saw "new records for monthly active Xbox users" and game streaming hours.
At the same time, Nadella cautioned Xbox fans not to expect a big turnaround anytime soon. "In Xbox content and services, we expect revenue to decline in the low-teens, reflecting a prior year comparable that benefited from strong first-party content, as well as the recent price changes for Xbox Game Pass as we focus on delivering more value to gamers," Nadella said during the call. "Hardware revenue should decline year-over-year."
Don't feel too bad for Microsoft, though. The company pulled in $82.9 billion over the quarter—that's right, just three months—representing a year-over-year growth of 18%, while profit—again, for just a three-month stretch—hit $31.8 billion, a 23% increase.
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