Microsoft announced its financial results for Q1 of fiscal year 2026, related to the period between July and September 2025, including an update on its gaming business.
According to the documents provided by the company, gaming revenue was 5,508 million dollars, compared to 5,621 million dollars achieved in Q1 last year, down 2% year-on-year.
Xbox Content and Services revenue grew 1% year-on-year despite having to compare with a strong year, driven by growth in Xbox Game Pass and third-party content, partially offset by a decline in first-party content.
On the other hand, Xbox hardware revenue declined 29% year-on-year, driven by the lower volume of consoles sold.
It’s worth mentioning that these results are sensibly better than the prediction provided three months ago, which expected “decline in the mid to high single digits” for gaming as a whole, and “decline in the mid-single digits” for Xbox Content and Services revenue. No guidance for hardware was provided at that time.
In perspective, while Microsoft’s gaming business didn’t achieve overall year-on-year growth this quarter, mostly due to the decline of hardware dragging the overall numbers down, essentially flats results like those announced today compared to a strong quarter in the previous year actually mean that this was a rather strong quarter as well.
Looking at Microsoft as a whole company, revenue was $77.7 billion, up 18% year-on-year, while operating income was $38.0 billion, up 24% year-on-year.
You may be wondering why Microsoft’s financial calendar is different compared to most companies. Quite simply, Microsoft has adopted a fiscal year that goes from July to June, unlike the norm, which is from April to March.
If you’re interested in comparing the results announced today with historical data, you can read our article dedicated to the previous quarter’s financial results, announced in July.
Other gaming companies have already announced their financial results this quarter, including Koei Tecmo, Electronic Arts, and Capcom. You can expect plenty more reports on this topic in the coming days and weeks.
