Microsoft has released its results for the third quarter of fiscal year 2026, and when it comes to Xbox revenue, the picture is still rough: although new CEO Asha Sharma made a lot of noise and introduced some changes in pursuit of a brighter future for Xbox, her appointment has not yet begun to affect the division’s results, as hardware revenue once again fell by more than 30%, while total Xbox revenue declined by 5%.

Xbox content and services revenue dropped by 5%, or 7% in constant currency, compared to the same period a year earlier, when strong performance from first-party content had produced favorable results. This marks the third consecutive quarter of decline for the Xbox division, following similar reports in October and January. It is also the second straight quarter in which Xbox hardware revenue has fallen by more than 30%. It would have been three in a row, but in the first quarter hardware revenue fell by “only” 29%. Sharma commented on the drop on Twitter: “While we have made progress expanding the business and our margins, player and revenue growth has not yet met our ambition. We know we have work to do to earn every player today and into the future.”

Microsoft’s overall revenue rose by 18%, reaching $82.9 billion. That growth was driven primarily by the company’s emphasis on AI and cloud services, which also underlines how small Xbox is within the wider balance sheet, when the company’s earnings over a single quarter can exceed the impact of the industry’s biggest acquisition, which Microsoft completed only a few years ago.

The ongoing decline in hardware revenue also shows the size of the challenge Sharma and her team face if they want to win players back to Xbox consoles. Since it has already been confirmed that memory issues are affecting the price of Project Helix, the device will need to be truly exceptional if it is meant to convince players who have spent the last six years becoming even more embedded in the PC, PlayStation and Nintendo ecosystems to spend serious money and move back to Xbox.

Still, because Sharma has generated a fair amount of goodwill around a new era for Xbox, it will be interesting to see whether hardware revenue improves in the fourth quarter of Microsoft’s 2026 fiscal year, just as players start preparing to buy into whatever the next phase of Xbox is going to be. It does not look especially likely, but such a rise would be a direct sign that Sharma’s words are already resonating positively with the brand’s fanbase.

Source: WCCFTech, Microsoft