Microsoft shared details on the company's financial results for Q2 FY25 on Wednesday, revealing that gaming revenue was down 7% year-over-year for the quarter ending Dec. 31, 2025. The quarter did see Xbox content and services revenue up 2%, to which the company credits growth in Xbox Game Pass. Xbox hardware revenue declined 29% year-over-year.

Xbox Game Pass made record revenues throughout Holiday 2024, indicating the subscription service generated in excess of $1 billion--the previous record.

As the industry shines a bigger spotlight on Xbox Game Pass, Microsoft is under pressure to deliver revenue through subscriptions to the popular service rather than software sales. It's a strategy that's a win for consumers,

Microsoft's latest earnings report shows that Game Pass has rocketed skyward. Satya Nadella, CEO of Microsoft, announced the news during the report's webcast: "All up, Game Pass set a new quarterly record for revenue and grew its PC subscriber base by over 30% as we focus on driving fully paid subscribers.

Xbox hardware revenue has fallen 29 percent year over year compared to Q2 2024. Microsoft (MSFT) announced the decline in its Q2 2025 earnings report released on. The decline in hardware revenue was not unexpected.