Xbox Consoles Sales Drop 32% While Microsoft Posts Record Revenue - No Discounts or Free Content
Date: January 31, 2026
Source: Tom's Hardware (3rd‑party author)
Microsoft’s gaming division is facing a paradox. According to a recent Tom’s Hardware report, Xbox hardware sales have fallen sharply-down 32% year‑over‑year-while the company’s overall revenue continues to climb to historic highs.
The decline is tied to several factors:
- Stagnant demand for the latest Xbox Series X|S consoles amid a saturated market.
- Intense competition from Sony’s PlayStation 5 and emerging cloud‑gaming services.
- Supply‑chain constraints that have limited the availability of new units.
Despite the hardware slump, Microsoft’s broader financial performance remains robust. The firm’s cloud services (Azure), productivity suite (Microsoft 365), and advertising divisions have all contributed to a surge in overall earnings, offsetting the shortfall in console revenue.
Analysts note that the company’s strategic shift toward subscription‑based services-such as Xbox Game Pass-helps sustain cash flow even as physical console sales wane. The growing subscriber base is generating recurring revenue that cushions the impact of the hardware downturn.
In short, while the Xbox brand is losing ground in the console market, Microsoft’s diversified business model is allowing it to “make more money than ever.” The situation underscores the evolving landscape of gaming, where software and services are increasingly eclipsing traditional hardware sales.
Read the full story on Tom’s Hardware: Microsoft’s gaming division flounders while the firm makes more money than ever - Xbox consoles sales drop 32%
