The Xbox sales space in the course of the Gamescom video video games commerce honest on the Commerce Truthful Middle in Cologne, Germany, Aug. 20, 2025.
Ina Fassbender | Afp | Getty Pictures
Microsoft’s Xbox has had a tumultuous yr.
A slew of layoffs, worth hikes and studio closures have led many to declare — not for the primary time — that the Xbox is lifeless.
Laura Fryer, former govt producer at Microsoft Recreation Studios, mentioned in June that the corporate appears to have “no need or actually cannot ship {hardware} anymore.”
Former Microsoft govt and ex-Blizzard Leisure president Mike Ybarra slammed Xbox’s “complicated” technique in a now-deleted X submit in October, saying the corporate is probably heading for a “dying by a thousand needles.”
The corporate’s total gaming income decreased 2% year-over-year, with a 29% dip in Xbox {hardware} gross sales, in line with Microsoft’s first-quarter earnings for fiscal 2026.
The broader console trade has been in a significant droop, with {hardware} spending down 27% year-over-year in November, which is usually a busy buying month, in line with a current report from analysis agency Circana.
It was the worst November in 20 years, IGN reported, citing Circana information.
Mixed Swap and Swap 2 unit gross sales have been down greater than 10% in the course of the month and PS5 gross sales have been down greater than 40%, IGN mentioned. However the Xbox Collection {hardware} took the most important beating, with a dramatic 70% drop in gross sales.
In console gross sales, Xbox can barely see the leaders this yr.
Nintendo‘s Swap 2 has offered 10.36 million models since its debut in June, the corporate mentioned in its newest earnings report. Sony‘s PlayStation 5 had 9.2 million models offered in 2025, in line with its most up-to-date monetary outcomes.
Microsoft’s Xbox Collection S and Collection X, at 1.7 million models, could not outsell the unique Nintendo Swap, which launched in 2017 and has offered 3.4 million models thus far this yr, information from sport gross sales monitoring website VGChartz estimated.
Microsoft declined to touch upon Xbox gross sales or numbers.
The corporate stopped reporting console unit shipments in 2015 because the hole between Xbox and PlayStation widened.
The Collection S, Collection X and PS5 all initially launched in 2020, with some updates being launched since then.
In November, Valve made a splash with its next-generation Steam Machine, which is ready to launch subsequent yr.
The reveal of its console-PC hybrid generated buzz throughout the gaming panorama, with The Verge declaring that “Valve simply constructed the Xbox that Microsoft is dreaming of.”
The mini dice will be capable to run Home windows PC video games by Valve’s personal Linux-based SteamOS as a tv console or as a gaming pc. Avid gamers can have entry to Steam’s in depth library of 1000’s of video games.
However Microsoft would not appear too fearful about falling behind.
“We’re not within the enterprise of out-consoling Sony or out-consoling Nintendo. There is not actually an excellent resolution or win for us,” Microsoft Gaming CEO Phil Spencer mentioned in a 2023 podcast.
In congratulating Valve on the discharge, the Xbox boss gave a nod to the motion to develop gaming entry “throughout PC, console and handheld gadgets.”
As Sony and Nintendo have firmly established themselves as {hardware} corporations, Microsoft is pushing towards Invoice Gates’ unique imaginative and prescient of an all-encompassing leisure hub in the lounge.
“In the end, the addressable market is anyone who needs to play video games, and Microsoft needs to serve that market,” Wedbush analyst Michael Pachter informed CNBC.
Microsoft CEO Satya Nadella mentioned in a current interview with the TBPN podcast that the corporate’s gaming enterprise mannequin will look to be “in every single place in each platform,” from consoles to TV to cellular.
His feedback additionally hinted that the following Xbox might operate extra like a PC.
“It is form of humorous individuals take into consideration the console and PC as two various things,” Nadella mentioned. “We constructed a console as a result of we wished to construct a greater PC, which may then carry out for gaming. So I form of need to revisit a few of that standard knowledge.”
Xbox President Sarah Bond echoed the concept, saying in a current interview with Mashable that the corporate’s next-generation console can have “a number of the considering” seen within the Xbox’s new handhelds, which have been constructed by {hardware} producer Asus in partnership with Microsoft.
Launched in October, these gadgets assist cross-platform gaming and might run PC video games purchased from Epic Video games, CD Projekt and Valve shops.
Xbox has already integrated that method into the newest Spine Professional, which rolled out in November.
Designed in partnership with Spine Labs, the moveable gaming controller presents entry to cloud gaming on cellular, PC, sensible TV and different streaming gadgets.
So what’s going to Microsoft’s new-gen console appear like?
Little is understood about the place the corporate is at in its growth.
A supply conversant in Xbox technique informed CNBC that the corporate is creating an open system that permits gamers to leap between console, PC and cloud gaming — and any type of leisure past gaming.
Gaming within the cloud
Pachter mentioned that whereas Microsoft will not be fully abandoning {hardware}, the corporate is splitting its viewers into present patrons fascinated by specialised consoles and everybody else.
In a 2019 interview with The Verge, Spencer mentioned that he was not involved with specializing in console gross sales as a lot as making video games accessible.
“I do assume as we take a look at the following decade of gaming, as we take into consideration reaching the over 2 billion individuals on the planet who play video games, lots of these individuals will not be shopping for consoles and gaming PCs,” Spencer mentioned.
Xbox Recreation Move subscription service, which supplies subscribers entry to video games from quite a lot of publishers, is a transparent instance of this technique.
Microsoft has been steadily increasing its title choices on the service.
The platform’s most elementary tier, Recreation Move Important (beforehand Recreation Move Core), which prices $9.99 and launched in 2023 with 36 video games, now presents over 50 titles.
Final tier members have entry to over 500 titles.
Sarah Bond, head of Xbox partnerships, speaks about Xbox Recreation Move in the course of the Microsoft Corp. Xbox occasion forward of the E3 Digital Leisure Expo in Los Angeles, June 9, 2019.
Patrick T. Fallon | Bloomberg | Getty Pictures
The expansion in cloud gaming has been blistering.
Xbox reported a report 34 million Recreation Move subscribers in 2024 and a complete Recreation Move income of just about $5 billion over the past fiscal yr.
Xbox mentioned in a November weblog submit that the variety of cloud gaming hours from Recreation Move subscribers was up 45% in comparison with the identical time final yr. The Microsoft subsidiary additionally mentioned console gamers are “spending 45% extra time cloud streaming on console and 24% extra on different gadgets.”
In asserting the benchmark, the platform added that Xbox Cloud Gaming is now in 30 international locations with the enlargement into India, which it referred to as “the fastest-growing gaming market on this planet,” residence to greater than 500 million avid gamers this yr.
Though Microsoft confronted heavy criticism from subscribers after growing the price of its Final tier by 50% from $19.99 to $29.99 in October, the corporate is reportedly testing an ad-supported model of Xbox Cloud Gaming.
Omdia senior principal analyst George Jijiashvili informed CNBC {that a} free Recreation Move tier would seemingly act as a user-acquisition instrument, particularly for avid gamers who haven’t invested in consoles but.
Nonetheless, as a result of excessive prices related to cloud gaming, an ad-supported tier would seemingly not be capable to really drive a significant quantity of income, he mentioned.
Cloud gaming is inherently tough to scale because it must steadiness computing energy and working prices with person affordability.
“With console-grade cloud gaming, it is advisable to basically run each single occasion of the sport in a server,” Jijiashvili mentioned. “You want a devoted {hardware} for each single person who’s streaming the sport, that means it simply would not scale.”
Regardless of gaming’s scaling limitations, Microsoft appears dedicated to doing what it has achieved with the remainder of its merchandise — shifting it to the cloud.
“They’ve developed right into a primarily cloud providers firm,” Pachter mentioned. “So every little thing they’ve achieved since they began buying studios at Xbox has been towards the linked expertise within the residence to view leisure.”
Recreation studio bonanza
Microsoft has spent the previous few years constructing out its leisure hub with a catalog of unique video games by an acquisition blitz.
In 2018, the software program large greater than doubled its sport studios with a string of acquisitions that included Ninja Idea, inXile Leisure and Obsidian Leisure.
Two years later, Microsoft purchased ZeniMax Media, which owned Bethesda, for $8.1 billion. It was the corporate’s largest gaming acquisition till its 2023 buy of Activision Blizzard for $75.4 billion.
Pachter mentioned that the software program large’s gaming spree was additionally a transfer to gather “sufficient content material” to bolster its cloud gaming providers.
But Microsoft’s method to utilizing its roster of unique titles has seen a stark shift lately.
As Xbox exclusives nonetheless struggled to compete with wildly profitable PlayStation video games like “Marvel’s Spider-Man” and “God of Struggle,” the corporate has made a definitive pivot away from its original-content technique.
Bond lately mentioned in an interview with Mashable that the concept of unique video games is “antiquated” as the corporate has leaned into cross-platform gaming.
Microsoft introduced in October that the upcoming “Halo” sport can be out there on Sony’s PlayStation 5, marking the primary time the most important franchise has develop into accessible on a competing console.
In 2024, Xbox opened 4 previously unique video games to different consoles.
Spencer mentioned on the time that the transfer didn’t point out a change in Xbox’s unique technique, however the firm has since continued to deliver a number of former exclusives to rival platforms.
In a January interview, Spencer mentioned that the corporate will not “put partitions up” the place customers can interact with Xbox video games.
“What we have realized is put the video games first, be sure that the video games might be as nice as they will,” he mentioned. “We love the expertise on our personal {hardware}, on our personal platform, however our video games will present up in increasingly more locations.”
Cuts and worth jumps
In Could, the corporate additionally shut down a number of studios beneath sport writer Bethesda, together with “Redfall” maker Arkane Austin and “Mighty Doom” developer Alpha Canine Video games.
The gaming unit was hit once more when company-wide layoffs in July led to Microsoft shelving “Good Darkish” and “Everwild,” video games which have reportedly been in growth for a minimum of seven years, in addition to a number of unannounced tasks.
Some have attributed the cost-cutting measures to mounting stress to hit lofty revenue targets.
The corporate reportedly requested its gaming division in 2023 to focus on revenue margins of 30%, in line with Bloomberg, which cited individuals conversant in the matter.
The aim was a big leap from the 12% revenue margin Xbox reached in 2022, as revealed in court docket paperwork, and nicely above the common video-game trade customary of 17% to 22%, analysts informed Bloomberg.
Microsoft informed CNBC that whereas the corporate does set formidable targets, the reported 30% revenue margin goal was incorrect.
Microsoft has raised costs on its getting older lineup of flagship consoles twice over the previous yr. Nintendo and Sony additionally introduced worth hikes for his or her respective consoles in August.
The PS5 at the moment begins at $549.99, and the unique Nintendo Swap and Nintendo Swap 2 value $399.99 and $499.99, respectively.
Xbox’s new ROG Xbox Ally and ROG Xbox Ally X have been priced at $599.99 and a staggering $999.99, respectively.
With a rising variety of consoles and handhelds out there, competitors is fierce for a devoted group of consumers that can at all times be fascinated by proudly owning {hardware}.
However Xbox is betting that cloud and cross-platform gaming are the long run.
For a decade, claims have been made in regards to the dying of the Xbox, and what comes subsequent may absolutely spell the tip, or deliver a metamorphosis.
