Xbox Division Down Slightly Year-Over-Year in Q1 27 Financials

• Xbox

Jesse Norris

1 hour ago

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Microsoft’s Q1 ’27 financial report just dropped, with Xbox declining slightly year-over-year, which still beat their guidance from 3 months ago.

Beating Expectations But Still Down

Microsoft has posted their Quarter 1 2027 Financials, with Xbox having the following performance:

• XBOX content and services revenue decreased 2% (down 1% in constant currency) driven by declines in third-party content and XBOX Game Pass, partially offset by growth in first-party content
• XBOX hardware revenue decreased 14%
• Operating expenses declined 3% driven by XBOX, partially offset by continued investments in R&D compute capacity and talent
• Operating income grew 2% (up 3% CC) and operating margins increased driven by lower amortization of intangible assets from the Activision acquisition, partially offset by the impact from a lower mix of Windows OEM revenue

This is the fourth straight quarter that Xbox has declined in growth year-over-year. Starting in FY26 Q2 they were down 5%, then 5% again in Q3, and 10% in Q4.

Three months ago, Xbox CFO Amy Hood said the company expected to decline “mid-single digits” in revenue for the Xbox division this quarter. While they still declined YoY, it was not as much as Microsoft had estimated.

Here is what Microsoft CEO Satya Nadella and CFO Amy Hood had to say about the Xbox Division:

In gaming focused on building great games and reaching players wherever they choose to play across console, PC, mobile, and cloud. Minecraft delivered a record quarter, reaching all-time highs in both engagement and revenue, while World of Warcraft had its largest beta in franchise history.

We enter the holiday season with one of our strongest first and third-party lineups in years, including Modern Warfare 4, which launched last week, to the best reviews for a Call of Duty game in more than a decade, and Grand Theft coming to Xbox next month.

Satya Nadella – Microsoft Fiscal Year 2027 First Quarter Earnings Conference Call

Xbox revenue decreased 2%, and Xbox content and services revenue decreased 2% and 1% in constant currency, driven by declines in third-party content and Xbox Game Pass, partially offset by growth in first-party content. Operating income increased 2% and 3% in constant currency, and operating margins increased year over year to 35%, driven by lower amortization of intangible assets from the Activision acquisition, partially offset by the impact from a lower mix of Windows OEM revenue.

in Xbox content and services, we expect revenue growth to be in the mid to high single digits, up sequentially, driven by the timing of content launches across both third and first party. With content launch patterns through the year, we expect growth to be the strongest in the second quarter, with some deceleration in Q3 and further moderation in Q4. Hardware revenue in Q2 should decline year over year.

Amy Hood during Microsoft Fiscal Year 2027 First Quarter Earnings Conference Call

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