Xbox revenue drops, leadership admits their failure

Xbox is currently in a major revenue decline; AND THEY KNOW IT! The new head, Asha Sharma, has acknowledged the problem.

Asha Sharma admitted the issue, saying: “We know we have work to do...”

We know that in Q1 2026:

• Hardware (consoles) revenue dropped by 33%

• Games and subscriptions dropped by 5%

• Overall Microsoft gaming revenue is down 7%

BUT THE ONLY POSITIVE is that there is still a record number of active players, more than ever before!

Xbox has already started lowering the price of Game Pass, and changes are being considered, such as game exclusivity.

Xbox currently has more players than ever, but is earning significantly less than expected due to a weak business model. This means their focus on maximizing player numbers through Game Pass and multiplatform releases may not be generating enough revenue. According to Asha Sharma: “We are aware the system isn’t working as it should.”

On top of that, Xbox has been shifting strategy for some time—fewer exclusives and a stronger focus on Game Pass and accessibility everywhere. But the problem is that Sony still dominates with the traditional model of exclusives and game sales.

Game Pass has also reportedly been labeled internally as an expensive and problematic model.

This is a clear signal that Xbox’s current strategy is unstable, and changes are likely coming—possibly a return to exclusives, adjustments to Game Pass pricing, or even a full business model shift.

In short; Xbox now has the largest playerbase than ever before, but they are earning much less than they should based on the number of players. And their new boss admits the problem they have.

Xbox has received a reality check, as its vision of Game Pass and an open ecosystem has yet to prove long-term profitability.