Highlights
- Microsoft denied that Xbox is targeting a 30% profit margin.
- Xbox is under pressure, with gaming revenue down 2% YoY and hardware sales falling 29%.
- Microsoft is pivoting away from hardware, focusing on subscriptions, cloud, and cross-platform gaming.
Microsoft has denied a report that it is pushing its Xbox gaming division to hit a 30% profit-margin target. In a statement provided to CNBC, the company said it sets ambitious financial goals but said the specific margin figure cited in recent reporting is not accurate.
The denial follows a Bloomberg report that said Microsoft began tightening Xbox profit expectations in 2023, pushing margins from about 12% in 2022 toward 30%, well above the industry’s typical 17% to 22% range.
The report also said Microsoft Chief Financial Officer Amy Hood and her finance team have taken a larger role in overseeing the gaming business.
Xbox Profit Pressure Reflected in Sales, Pricing, and Cuts
The margin debate comes as Xbox faces financial pressure, with Microsoft’s first-quarter fiscal 2026 gaming revenue down 2% year-over-year (YoY) and Xbox hardware revenue falling 29%, while third-party estimates show Xbox Series X and Series S sales trailing rivals.
In response, Microsoft has pursued both revenue and cost measures, raising Xbox console prices and Game Pass subscription fees in 2025 and briefly considering, before dropping, a plan to price new games at $80.
Xbox Game Studios head, Matt Booty, said the business needs to remain a “healthy business,” while noting that game pricing beyond $70 is not currently planned. “Monetization just happens in so many different ways right now,” he said to Variety, adding that Xbox continues to balance pricing decisions with player feedback.
Cost cuts have been significant in 2025, with Microsoft laying off about 1.9K employees, roughly 9% of its gaming workforce, in January, followed by another 650 Xbox-related job cuts in September, alongside studio closures and the cancellation of long-running projects such as Perfect Dark and Everwild.
Xbox
Hardware struggles are not unique to Xbox, but the gap remains wide, with Circana data showing U.S. console hardware spending down 27% year-over-year (YoY) in November and Xbox Series hardware seeing the steepest decline.
By comparison, Nintendo said Switch 2 sold over 10M units since launch, while Sony reported 9.2M PlayStation 5 units sold in 2025.
Against that backdrop, Microsoft is prioritizing scale over hardware share, with Microsoft Gaming CEO Phil Spencer saying the company is “not in the business of out-consoling” rivals and instead focusing on subscriptions, cloud gaming, and cross-platform releases.
As Microsoft heads into a milestone 2026 year for Xbox and Halo (video game series), the company’s rejection of the 30% margin claim underscores the scrutiny on how financial targets are shaping the future of its gaming business.
