Microsoft announced its Q3 2026 earnings, reporting strong performance in its cloud business, but a 33% decline in Xbox hardware sales.
On April 29, 2026, local time, Microsoft announced its financial results for the third quarter of fiscal year 2026 (January-March). In particular, Microsoft Azure, Microsoft's cloud business, performed well, but Xbox-related sales recorded a decrease compared to the same period last year.
FY26 Q3 - Press Releases - Investor Relations - Microsoft
Microsoft reports sinking Xbox revenue as its cloud business climbs | The Verge
https://www.theverge.com/tech/920785/microsoft-xbox-revenue-q3-2026-earnings
Microsoft's revenue for the third quarter of fiscal year 2026 is projected to be $82.9 billion (approximately 13.29 trillion yen), up 18% year-over-year; operating profit is projected to be $38.4 billion (approximately 6.16 trillion yen), up 20% year-over-year; and net profit is projected to be $31.8 billion (approximately 5.65 trillion yen), up 23% year-over-year on a GAAP basis.
Microsoft CEO Satya Nadella emphasized the company's focus on and success in the AI business, stating, 'Microsoft is focused on providing cloud and AI infrastructure and solutions to help every company maximize its results in the age of agent computing. Our AI business has generated over $37 billion in annual revenue, a 123% increase year-over-year.'
Microsoft's cloud business revenue rose 29% year-over-year to $54.5 billion (approximately 8.73 trillion yen). Specifically, revenue from its intelligent cloud business increased 30% year-over-year to $34.7 billion (approximately 5.56 trillion yen), while revenue from Azure and other cloud services increased 40% year-over-year.
Revenue in the Productivity and Business Processes segment increased 17% year-over-year to $35 billion (approximately 5.61 trillion yen). Specifically, revenue from Microsoft 365 commercial cloud increased 19% year-over-year, revenue from Microsoft 365 consumer cloud increased 33% year-over-year, revenue from LinkedIn increased 12% year-over-year, and revenue from Dynamics 365 increased 22% year-over-year.
Personal computing revenue fell 1% year-over-year to $13.2 billion (approximately 2.12 trillion yen). Windows OEM and device revenue decreased 2% year-over-year, Xbox content and services revenue decreased 5% year-over-year, and search advertising revenue, excluding traffic acquisition costs, increased 12% year-over-year. Xbox hardware revenue fell 33% year-over-year.
In an effort to improve the struggling performance of Xbox, Microsoft has made several changes, including significantly lowering the price of its most expensive subscription service, 'Xbox Game Pass Ultimate,' and changing the name of its gaming division .
Microsoft significantly reduces the price of 'Xbox Game Pass Ultimate,' but the new Call of Duty game won't be added for another year - GIGAZINE
CEO Nadella explained that the recent changes related to Xbox were an effort to 'win back our fans.' He further explained, 'The team is reaffirming its commitment to our core fans and players and shaping the future of gaming,' and added, 'Last week's price changes for Xbox Game Pass are an example of how we are responding quickly to customer feedback.'
Furthermore, CEO Nadella explained that recent changes in Windows include 'improved performance on devices with limited memory, simplified Windows Update , and a return to core and basic functionality.'
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