Microsoft has shared its financial earnings for the third quarter of its 2025 fiscal year, and there’s good news for Xbox – with gaming revenue up, despite hardware revenue continuing to fall.
As a whole, Microsoft made $70.1bn in revenue during Q3 and saw a net income of $25.8bn, marking a 13 and 18 percent year-over-year increase respectively. That growth was predominantly driven by its Cloud and Office services, but its gaming division saw success too.
Overall, Xbox gaming revenue was up five percent year-over-year, and within that, Xbox content and services – which includes Microsoft’s first-party game releases and Game Pass – saw an eight percent increase. While the quarter saw Avowed launch for Xbox and PC, the company primarily attributed its Q3 gaming growth to Call of Duty and Minecraft. Additionally, Game Pass subscriptions are up – but it’s unclear by how much, given membership figures haven’t been revised since Microsoft revealed they’d crossed 34m last February.
These successes were offset, however, by a continuing decline in Xbox hardware numbers over Q3, with console sales falling by six percent year-on-year. Xbox’s hardware slump has coincided with Microsoft’s continuing efforts to pursue a platform agnostic approach for its releases, with its various cloud gaming partnerships meaning Game Pass titles can be streamed on everything from Meta Quest headsets to TVs. Even so, Microsoft has repeatedly indicated it has no intention of backing out of the console market; not only has it discussed various Xbox handheld plans, it’s confirmed work on an Xbox Series X/S is well underway.
Xbox president Sarah Bon previously said this new console would focus on “delivering the largest technical leap that you will have ever seen in a hardware generation”, and recent reports have claimed Microsoft is currently aiming for a 2027 release.