Microsoft Q1 revenue hits $92.3B as Xbox first-party content offsets hardware drop

Microsoft reported $92.3 billion in revenue for the three months ended September 30, 2026, up 19% year-on-year, while its Xbox content and services revenue slipped 2%, according to GamesIndustry.biz. Xbox hardware revenue dropped 14% over the same period.

Net income for the quarter rose 32% to $36.6 billion. Revenue in the devices and consumer segment, which includes Xbox, fell 3% to $15.5 billion. GamesIndustry.biz reports that the decline in Xbox content and services came mainly from weaker third-party content and Game Pass results. Growth in first-party content made up part of that shortfall, and Microsoft said Minecraft hit record levels of both engagement and revenue.

Cost of revenue for the devices and consumer segment fell 8%. Microsoft attributed this to lower amortization of intangible assets from the Activision acquisition and to the drop in hardware revenue.

Xbox leadership on the results

Xbox CEO Asha Sharma pointed out that the 2% decline was much smaller than the 10% drop reported the previous quarter. She said Minecraft and World of Warcraft Forever set records and that revenue from the Xbox PC platform grew by double digits. She also said supply is still limiting console sales.

Console sales remain constrained by supply, with more demand than consoles available.

Asha Sharma, Xbox CEO

Sharma said Microsoft is trying to get more consoles to players, in part through a larger refurbishment program.

For the second quarter, CFO Amy Hood expects Xbox content and services revenue to grow in the mid to high single digits, driven by the timing of first- and third-party releases. She also expects hardware revenue to decline year-over-year. According to Hood, growth should peak in Q2, then slow in Q3 and slow further in Q4.

CEO Satya Nadella pointed to the holiday lineup, naming Modern Warfare 4, which launched last week, and Grand Theft Auto 6, which comes to Xbox next month.

We enter the holiday season in one of our strongest first- and third-party line up in years

Satya Nadella, Microsoft CEO

Restructuring continues

GamesIndustry.biz notes that Xbox is still restructuring. That process has cut its workforce by 20% so far, and more layoffs are expected in November and January. Earlier this week, Xbox staff were among as many as 60,000 Microsoft employees in the US, UK, Canada and India who were offered voluntary exit. Earlier this month, Sharma reportedly told staff that Xbox had begun to return to growth.