If anyone needed more confirmation that Xbox is not in a good place right now, the financial report for the final quarter of this fiscal year makes it brutally clear. Although Microsoft’s overall revenue has increased, the company’s latest fiscal report reveals a significant decrease in Xbox services and content sales for the fourth quarter of 2026.
Compared to last year, Microsoft’s total gaming revenue has gone down by 10% — a major decrease for a billion-dollar company. Content and services revenue was aldo down by 10%, while hardware revenue dropped by 13%. It’s no mystery that Xbox is losing money: The recent layoffs have been the talk of the gaming world, with several Xbox Game Studios forced to become independent or to suffer hindering cuts.
In a previous statement, Asha Sharma, Xbox CEO, said that the business is currently not healthy. And while a lot of effort has been put into improving Game Pass, multi-platform gaming, and the number of games available on Microsoft platforms, the business did not grow at an expected pace. With the release of the financial report, Sharma spoke out and said Xbox intends to focus on what players value in order to grow the business alongside its audience.
The intention is to keep growing and report better numbers next year. Sharma did not reveal any details on how she intends to grow the company, but fans were not afraid to let her know what they wanted to see. If there’s one topic that gaming fans are particularly sensitive about right now, it’s game ownership. Recently, Sony revealed that it would be moving away from physical discs and taking a digital-only approach to the business. Gamers were not happy with this announcement, and many are considering abandoning the company for it. So, when Sharma mentioned that Xbox wanted to invest in “what players value,” the comments section was overtaken by players saying how much they valued exclusives and the right to own physical media.
There are rumors that Project Helix, Xbox’s next-gen console, won’t have a disc drive, meaning that Xbox could be terminating physical disc production soon. However, this has not been confirmed. At this time, all we know is that Xbox is working on a way to digitize physical media. The goal is to make it possible for players to play the games that they physically own by inserting them into their console and linking them to their account. If they were to ever sell their physical disc, the license would be transferred to another account once the disc was inserted into a different console. This way, players would benefit from the practicality of digital games while keeping their physical media and the option to sell, borrow, or give away the disc in the future.
Xbox now has an opportunity to benefit from players’ current outrage against Sony. Digitalizing physical media could be a quality-of-life addition that incentivizes fans to buy physical discs and keep their production alive rather than the opposite, but it can go either way. It remains to be seen if this will be enough to shape Xbox’s future policies, and whether the company’s and player’s idea of “value” is aligned.
