Microsoft isPivoting from an exclusive-content strategy to a broad, cross‑platform, cloud‑centric approach, aiming to bring gaming to consoles, PC, cloud, and mobile.

A string of studio acquisitions—Ninja Theory, inXile, Obsidian, ZeniMax, and Activision Blizzard—preceded a shift away from a strict exclusive‑first mindset, with several high‑profile exclusives moving to other platforms and even Halo’s next entry rumored for PlayStation 5.

Top executives, led by CEO Satya Nadella, describe a future where gaming is everywhere on every platform, with the next Xbox potentially resembling a PC and an open system that bridges console, PC, and cloud gaming.

Overall gaming revenue declined about 2% year over year in the latest quarter, with hardware down 29% and November console spending off 27% nationwide amid the worst November in two decades; Xbox Series S/X sales dropped around 70% year over year.

For fiscal 2026’s first quarter, Microsoft reported a 2% year‑over‑year drop in gaming revenue and a 29% decline in Xbox hardware sales.

Industry‑wide hardware spending fell sharply in November, with Xbox Series hardware down about 70%, while Nintendo Switch 2 and PS5 also saw declines.

Microsoft has pursued cost‑cutting, including multiple rounds of layoffs and studio shutdowns (such as Arkane Austin and Alpha Dog Games), amid pressure to hit profit targets, which the company has disputed as overblown in relation to a rumored 30% margin target.

Xbox has endured significant turmoil over the past year—layoffs, price increases, and studio closures—feeding a narrative that the hardware‑centric strategy is failing.

Hardware pricing has risen across major devices (PS5, Switch, ROG Xbox Ally), intensifying competition as Microsoft shifts away from flagship hardware toward a broader ecosystem.

Hardware market reality shows Nintendo Switch 2 leading with about 10.36 million units sold since June, Sony PS5 at 9.2 million in 2025, and Xbox Series S/X at 1.7 million—highlighting a large platform gap.

Executives emphasize a balanced view: Phil Spencer distances the team from outdoing Sony/Nintendo on hardware, Nadella envisions gaming everywhere across platforms, and others critique the hardware‑first approach.

Xbox is losing ground to PlayStation and Nintendo, with declining revenues, cutting hardware, and weak console sales shaping the competitive landscape.