Asha Sharma says Xbox expects to ‘return to growth’ by this time next year, as it reports an annual decline in revenue

Xbox CEO Asha Sharma says it expects to “return to growth” by this time next year.

Microsoft posted its financial reports for the last quarter on Wednesday, stating that while the company as a whole was seeing continued growth – with revenue and operating income both up 18% – the Xbox division was instead seeing reduced revenues.

According to its Q4 FY2026 results – which cover the period from April 1 to June 30, 2026 – Xbox content and services revenue declined 10% compared to the same Q4 results the previous year.

Xbox hardware revenue also declined according to Microsoft, with a 13% drop compared to Q4 FY2025.

This has been a recurring situation for Xbox throughout the past financial year. Microsoft‘s Q3 earnings report showed that Xbox content and services revenue was down 5% based on the same period last year, and that hardware revenue was down 33% year-on-year.

Its Q2 earnings results also showed year-on-year declines of 5% and 32% respectively, while Q1 showed a growth of 1% in content and services but a 29% decline in hardware revenue.

Sharma says growth “will take time”

Posting on X, Sharma stated that while Xbox saw new players trying its services for the first time in the past financial year, that hasn’t yet resulted in a notable growth, but that the expectation was that the company would start seeing ‘growth’ again by the end of FY2027 (which ends June 30, 2027).

“In FY26, over 200 million new players came to Xbox and our games, but our business did not grow with our audience,” Sharma stated. “We need to close that gap by investing in what players value. That will take time, but we expect to return to growth by the end of FY27.”

During Microsoft’s presentation, Microsoft CEO Satya Nadella referred to Xbox’s decline, stating that the company was in the process of undertaking the “reset” mentioned by Sharma in the past.

“When it comes to Xbox, we are making the necessary decisions required across our content portfolio, platform, and operations to reset the business for long-term growth,” Nadella said.

“We have the best IP in the industry, and talented studios around the world, and believe we can bring these strengths together and expect to return the business to growth in fiscal 2027.”

Part of this return to growth and the “reset” described by Sharma and Nadella has involved major layoffs across the Xbox division, with 1,600 jobs cut earlier this month and a further 1,600 layoffs to be made throughout FY2027.

This included cutting ties with numerous Xbox-owned studios – Compulsion Games and Double Fine Productions have now returned to becoming fully independent studios, while Ninja Theory and Undead Labs have “entered terms to join new ownership”.