Xbox gaming revenue dropped 7% to $5.34 billion in Microsoft's fiscal Q3, marking the third straight quarter of decline and prompting a candid public response from new CEO Asha Sharma.
"Player and revenue growth has not yet met our ambition," Sharma wrote on X on April 29. "We know we have work to do to earn every player today and into the future." The numbers paint a grim picture. Xbox content and services revenue fell 5% year-over-year for the period ending March 31, while hardware revenue cratered 33% -- the second consecutive quarter of 30%+ hardware declines.
Microsoft attributed the content drop partly to tough comparisons against last year's Call of Duty: Black Ops 6 launch.
Sharma inherited the mess in late February after Phil Spencer's retirement, taking the reins with Q3 already underway. Her first major move came last week: slashing Game Pass Ultimate pricing with the caveat that future Call of Duty games won't hit the service on day one.
Microsoft CEO Satya Nadella struck a patient tone during the earnings call, saying the Xbox team "is recommitting to our core fans and players and shaping the future of play." He pointed to the Game Pass price changes as evidence Xbox is "staying responsive to customer feedback."
Don't expect a quick turnaround. CFO Amy Hood warned that Xbox content and services revenue will decline in the "low teens" next quarter against a year-ago period boosted by strong first-party content.
Hardware revenue will fall year-over-year too. The broader Microsoft machine is humming -- the company pulled in $82.9 billion in total revenue (up 18%) and $31.8 billion in profit (up 23%), driven by Azure and AI. Xbox remains a rounding error on the balance sheet, but Sharma's public acknowledgment signals a leadership shift in tone.c
Sharma will get her first chance to lay out a vision next week. Xbox is hosting a Project Helix event to detail the next-generation console, the successor to Xbox Series X/S. The hardware arrives amid a global memory shortage that could drive up component costs, adding another variable to the recovery math.
