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Xbox hardware sales take a hit, but Game Pass keeps growing

Xbox hardware sales are down 29%, but Game Pass keeps growing—what does this mean for the future of Microsoft’s gaming strategy?

Xbox Game Pass

Microsoft’s latest financial report shows a mixed bag for its gaming division. While Xbox hardware sales have plummeted, Game Pass subscriptions continue to thrive, helping offset some of the decline.

Key takeaways from Microsoft’s Q2 2025 earnings:

  • Xbox hardware sales dropped by 29%, a significant decline year-over-year.
  • Overall gaming revenue fell by 7%, despite strong Game Pass numbers.
  • Game Pass continues to grow, though Microsoft didn’t reveal exact subscriber numbers.
  • First-party game sales surged, likely driven by Starfield, Call of Duty, and the upcoming Indiana Jones: The Great Circle.
  • Microsoft’s total revenue hit $69.6 billion, marking a 12% increase overall—but the gaming division is underperforming compared to other segments.
  • The hardware slump is largely due to slowing Xbox Series X|S sales, as the current generation enters its mid-cycle phase. Meanwhile, Game Pass remains a bright spot, reinforcing Microsoft’s focus on subscription-based gaming.

The success of recent acquisitions, including Bethesda and Activision Blizzard, could further shape Xbox’s long-term strategy, shifting emphasis away from hardware and toward cloud-based and cross-platform services.

For gamers, this shift means Microsoft is doubling down on Game Pass and digital services rather than relying on console sales. Expect more investment in cloud gaming, exclusives, and cross-platform access rather than a major hardware refresh anytime soon. If you’re a subscriber, this could mean even more big-name titles hitting the service, but if you prefer traditional console gaming, future Xbox hardware innovations might take a backseat.

For now, the big question is whether upcoming exclusives can keep Game Pass growing while Microsoft figures out how to address its hardware slowdown.

Check PCGamesN for the full Xbox Game Pass games list.