Inntektene fra Xbox-innhold og -tjenester falt med 10 prosent i Microsofts fjerde kvartal.

Microsoft closed its 2026 fiscal year with $90 billion in quarterly revenue, up 18 percent, and one line in the report belongs to gaming: Xbox content and services revenue fell 10 percent year over year in the three months to June 30. The wider More Personal Computing segment came in at $12.9 billion, down 4 percent, with Windows OEM and Devices off 7 percent and search advertising excluding traffic acquisition costs up 10 percent. Operating income for that segment slipped to $2.7 billion from $3.2 billion a year earlier. Across the full year, More Personal Computing brought in $54.1 billion against $54.6 billion in fiscal 2025, so the June quarter is where the drop concentrated.

Xbox appears once more in the release, as a cost. Microsoft listed severance expense and impairment charges in Xbox among the discrete items that pulled results away from the guidance it issued on April 29, partially offsetting a $3.2 billion gain on its Anthropic investment and lower-than-expected costs from the Voluntary Retirement Program. Those items together added 27 cents to diluted earnings per share. Beyond that, the report says nothing about games.

Everything else had a different quarter. Microsoft Cloud revenue reached $59.3 billion, up 27 percent. Intelligent Cloud grew 32 percent to $39.3 billion, Azure and other cloud services rose 43 percent, and commercial remaining performance obligation climbed 84 percent to $678 billion. Satya Nadella said Azure passed $100 billion in annual revenue for the first time and Microsoft 365 Copilot reached more than 30 million paid seats. Full-year revenue came to $331.8 billion, up 18 percent, on net income of $133.7 billion.

"We delivered a strong quarter to close out the fiscal year"

— Amy Hood

Gaming got a few sentences on the earnings call.

"We are making the necessary decisions required across our content portfolio, platform, and operations"

— Satya Nadella

Nadella called those decisions a reset for long-term growth, pointed to Microsoft's franchises and studios as the assets to rebuild on, and told analysts he expects the business back in growth during fiscal 2027.

The decisions arrived earlier this month. Reporting around the July 6 reorganization said Microsoft planned to cut almost 5,000 employees across gaming studios and services teams; Eurogamer puts the announced total at 3,200, with 1,600 of those cuts implemented immediately. Bethesda and id Software both lost staff. Four studios left the company outright, Arkane Lyon has been named as a possible fifth, and Double Fine announced its own layoffs on Wednesday, which it tied to its new independent status.

Most of those exits are not closures. Compulsion Games and Double Fine became independent studios keeping the rights to their games, with Microsoft funding their next projects until they find publishers. Ninja Theory and Undead Labs are in talks with prospective owners, their IP moving with them, and Microsoft will keep supporting Senua and State of Decay 3 into next year. Arkane, reported in June as a closure candidate whose shutdown would have taken Marvel's Blade with it, is being lined up for a sale instead. Inside Bethesda, The Elder Scrolls, Fallout, Doom, Quake and Wolfenstein were named as the surviving priorities. Add the funding pulled from IO Interactive's Project Fantasy and the Game Pass talks frozen with third-party studios, and that is the ledger Xbox Reset 2026 has produced since Asha Sharma took over from Phil Spencer and Sarah Bond in February. I care less about the 10 percent than about how many teams are left to build the slow, dense open worlds that keep me playing.

Sharma's first moves ran the other way. She dropped the "This is an Xbox" campaign, cut Game Pass prices after a 50 percent hike drove subscribers off, and confirmed new hardware under the name Project Helix. Then the money got tighter. From August 1, 512 GB consoles rise $100 and 1 TB models $150, pushing the Series X to $799.99 and the digital version to $749.99 while the 2 TB model is phased out, the third increase in 14 months. Microsoft attributed it to storage and memory prices, which it says have climbed more than 2.5 times, with another doubling expected by the fall of 2027. Sony raised PS5 prices as well. The component squeeze traces to the same AI buildout that carried Azure past $100 billion, and Microsoft is one of the buyers driving it: the company put $115.9 billion into property and equipment during the fiscal year, $35.8 billion of that in the June quarter alone. Game Pass has narrowed too, with new Call of Duty releases removed and Activision advertising that Modern Warfare 4 skips the service this year.

Three days before the earnings release, the Xbox outage on July 27 took sign-in, the store, and game launches down worldwide for most of a day. A licensing service outside Xbox failed, and with it the entitlement checks that confirm a player owns what they are trying to run, so libraries went blank and disc-based and backwards-compatible games refused to start. Chief technical officer Scott Van Vliet published a post-incident account, called the situation unacceptable, and said the work now goes into the dependencies under sign-in and launch. Service returned at 2:30 pm Pacific, unevenly by region. It landed badly in a year when Sony has said it will stop producing discs for games released after January 2028 and Xbox is reportedly building a disc-to-digital system of its own.

Microsoft and Xbox also remain on the BDS boycott list, which asks players to cancel Xbox subscriptions and skip Xbox-owned games over the company's cloud work with Israel's Ministry of Defense. Microsoft ended its usage agreement with IDF intelligence Unit 8200 in September 2025, after a Guardian report on Azure holding intercepted Palestinian phone calls, and president Brad Smith said at the time that the company had examined the claims against two principles, protecting privacy and preventing mass surveillance of citizens. Globes reported in May that an internal investigation led to the departure of Alon Haimovich, general manager of Microsoft Israel, along with several managers in the governance department, and that the Israeli office was handed to Microsoft France until a permanent replacement is named. The Ministry of Defense contract comes up for renewal at the end of the year, reportedly on a smaller scale, with defense computing units already moving cloud workloads to Amazon and Google. Microsoft declined to comment on the Globes report.

The growth Nadella promised has to come out of a release calendar that is already crowded. Windows Central's Jez Corden reported that Fable's budget ran well past what Xbox planned, making Playground Games' RPG one of the company's most expensive projects, and it arrives February 23, 2027, in a month that also holds Tomb Raider: Legacy of Atlantis, God of War: Laufey and Persona 4 Revival. Gears of War: E-Day and Clockwork Revolution stay Xbox exclusives, and Bloomberg has reported that future Halo, Fallout and Elder Scrolls games could go exclusive on the single-player side while multiplayer stays multiplatform. I think Fable is the wrong game to hang a recovery on in that month, and an expensive miss there would land in the middle of the year Microsoft has just promised growth in.

Its presence on Gamescom 2026 is the nearer test: 25 games at the Xbox booth in Cologne from August 24 to 30, with playable demos of Fable, the Gears of War: E-Day campaign, Minecraft Dungeons II, Stranger Than Heaven, Metro 2039 and the 6v6 mode of Modern Warfare 4, plus a 25th anniversary FanFest. Sony is skipping its own booth at the show. Sharma has said she wants Xbox platforms reaching a billion people a day, and Cologne is the first place that ambition meets a queue of players.

Fiscal 2027 started on July 1, and its biggest release is not Microsoft's. GTA 6 arrives on PS5 and Xbox Series X/S on November 19, and Rockstar's launch will move content and services revenue for every platform selling it. I know the growth promised for fiscal 2027 leans harder on Rockstar's November than on anything Xbox ships before it, which is an odd place for a platform holder with this much IP. The line that just fell 10 percent is the one to check in October and January.