United Kingdom, Oct. 31 -- Microsoft has reported a 29 per cent decline in Xbox hardware sales for the first quarter of its 2026 fiscal year.

For the three months ending with September 30, 2025, Microsoft recorded $77.7 billion in total revenue, up 18 per cent year-on-year.

The company said this was driven largely by growth in Cloud and AI services, which surged 28 per cent to $30.9 billion.

However, in its More Personal Computing segment - which includes Windows, Surface, and Xbox - revenue rose only four per cent to $13.8 billion, with gaming showing signs of strain.

Overall gaming revenue fell by two per cent, a dip Microsoft attributed to "a decline in Xbox hardware".

The company's CFO Amy Hood said in a statement that despite th...