Microsoft recently released its second quarter of 2026, revealing a decline in revenues in its Xbox game sector. The whole game business block contracted by 9 per cent, including a 5 per cent drop in Xbox Game Pass’s “content and services” income. Hardware operations were hardest hit, with a sharp drop of 32 per cent in sales, most likely due to weak mainframe sales.
Overall, Microsoft noted that the Xbox operation had led to a 3 per cent decline in corporate revenue, partially offset by increases in income from other services, such as search, news advertisements and Windows OEM (original equipment manufacturer). In particular, the company noted that Windows OEM had contributed 1 per cent of the increase in equipment operations, thanks to the end of the life cycle of Windows 10. The bulk of Microsoft’s revenue during the quarter continued to come from its productivity and commercial software and service packages (including Microsoft 365 applications and cloud services), with a 17 per cent increase in the total revenue of the plate. The decline in revenues from hardware sales is not surprising, as the performance of Xbox Series X/S hosts has indeed struggled over the past few months. According to a report from last December, the number of hosts in the series in the United States was at an all-time low. In November 2025, Xbox Series X/S mainframe sales dropped by 70 per cent compared to November 2024.
Although the reasons may be multiple, the decline in sales was attributed by Cricana analyst Matt Piscatla to the current overprice of the Xbox mainframe. Microsoft raised the active mainframe price in September last year to $599.99 for Xbox Series X and $429.99 for Xbox Series S of 1 TB. The outlook may be even less promising for consumers who expect to buy Microsoft mainframe. Last November, a report noted that, owing to global memory shortages, Microsoft would again announce an Xbox price increase. According to YouTube channel “Moore’s Law is Dead”, the Xbox mainframe will increase prices for a third time because of Microsoft’s lack of planning for this RAM shortage. He said: “It is clear that they had no advance planning at all. If you still want to buy Xbox at current prices for some reason now, then the price may rise very quickly or the supply will be completely depleted, because I have received warnings from Microsoft sales representatives from multiple sources that the Xbox Series hosts will soon be affected.”
Looking ahead, reports indicate that Microsoft and Sony’s subgenerational mainframes may be delayed until 2027 due to memory shortages. However, Xbox Managing Director Sarah Bond had previously stated that the company’s next-generation mainframe would provide a “very high-end, well-designed, high-quality experience”, which might mean that the sale price would be in the higher range. In the game business, Microsoft is also investing more effort in software. Recently, the company, in collaboration with Wah, has launched the ROG Xbox Ally and Xbox Ally X handheld systems, as well as an entirely new “full screen experience” designed to make Windows 11 more manageable when there is no mouse or keyboard.