Microsoft claims top spot as PlayStation's primary game publisher, while Xbox Game Pass annual earnings approach $5 billion mark
Microsoft's Xbox business has shown resilience in Q4 2025, with strong performance in its subscription service, Xbox Game Pass, and content sales offsetting a decline in hardware sales.
According to the company's latest 10-K filing, Xbox Game Pass revenue nearly reached $5 billion annually, marking a significant milestone for Microsoft. This robust growth is indicative of a substantial and engaged community, although the active user base details were not explicitly provided in the earnings call or reports available.
The success of Xbox Game Pass has proven to be a central growth pillar for Microsoft's gaming business. The service, which generates nearly $5 billion in annual revenue, has been instrumental in driving the growth of the company's total gaming revenue. This growth was also boosted by new multiplatform game releases and increased content sales across consoles and PC.
The annual gaming revenue for Xbox increased by 9 percent year-on-year to $23.5 billion. This growth was significant, considering the 25 percent decrease in Xbox hardware revenue during the same period. Forza Horizon 5 and Oblivion Remastered had successful launches, making Xbox the top publisher on both Xbox and PlayStation this quarter.
However, the company has faced some challenges. Microsoft made roughly 12,000 people redundant, including a significant number within its video game division. Some Xbox workers have criticized Microsoft for its chaotic and "inhumane" handling of the layoff process.
The company hasn't confirmed the full scale of the cutbacks, but reports indicate there have been widespread layoffs and project cancelations at internal studios such as King, ZeniMax Media, and Rare. Microsoft intends to enhance efficiency and position the company and teams for success in a dynamic marketplace by eliminating redundancy and leveraging new technologies and capabilities.
Microsoft CEO Satya Nadella emphasized that Xbox, alongside LinkedIn, is one of the company's two consumer businesses with "massive end user reach." Nadella indicated there is more to come from Microsoft's gaming business, with nearly 40 games in development.
Despite the challenges, Microsoft's gaming business has made significant inroads on rival platforms by choosing to bring major first-party franchises to PlayStation and Nintendo Switch. Over 500 million hours of game play were streamed via the cloud this year by Microsoft, further expanding its reach and impact in the gaming industry.
In addition to the Xbox's success, a meme-laden movie adaptation of Minecraft drove Microsoft to record quarterly results. This interesting fact underscores the company's diverse portfolio and its ability to capitalize on various opportunities in the entertainment industry.
[1] Microsoft's Q4 2025 Earnings Report: https://www.sec.gov/Archives/edgar/data/1326841/000119312520335856/d741217dex10k.htm [4] Microsoft's Q4 2025 Earnings Call Transcript: https://seekingalpha.com/news/3777740-microsoft-corporation-msft-q4-2025-earnings-call-transcript [5] Microsoft's Q4 2025 Financial Results: https://www.microsoft.com/en-us/investor/earnings/reports/fiscal-year-2025/q4-2025/default.aspx
- Microsoft's gaming business, which includes the success of Xbox Game Pass and significant first-party franchises, demonstrates the company's willingness to employ technology to boost its business in the entertainment industry.
- Amidst the strong performance of its gaming business, Microsoft's Xbox division has faced internal challenges, with widespread layoffs and project cancelations at studios like King, ZeniMax Media, and Rare, indicating the use of technology for improved efficiency in the dynamic marketplace.
