Private equity circles Xbox after five straight quarters of falling revenue
Private equity circles Xbox after five straight quarters of falling revenue
A group of unnamed private equity firms weighed a buyout of Xbox, the gaming division of Microsoft (NASDAQ: MSFT), at a valuation of $100.0B to $150.0B, The Information reported on Oct 20, citing people familiar with the discussions. The talks were exploratory and never reached a negotiation with Microsoft, and Xbox CEO Asha Sharma had said on Sep 30 that “Xbox is not for sale.” Netflix (NASDAQ: NFLX) separately offered $500m for seven years of Xbox film and TV rights; Xbox countered at $800m, and Netflix withdrew, Puck reported on Oct 23.
The interest comes as the business shrinks. Xbox revenue rose 9% to $23.5B in the fiscal year to Jun’25, the first full year with Activision Blizzard, then fell 7% to $21.8B in the year to Jun’26. Every quarter since Q3’25 has come in below the year before, five in a row, and Q3’26 fell 2% to $5.4B, roughly where the decline started.
Consoles led the slide: hardware revenue fell year over year in every quarter Microsoft has reported since Q3’24, by as much as a third, on lower console volumes, after Microsoft raised US console prices in May’25 and again in Oct’25. Content and services, which carry Game Pass and Microsoft’s own games, turned negative in Q4’25 and fell 10% in Q2’26. Game Pass Ultimate went from $19.99 to $29.99 a month in Oct’25, and Microsoft cut it to $22.99 in Apr’26.
Call of Duty, the franchise Microsoft bought with Activision Blizzard, has turned around under Xbox. Modern Warfare III, the first release after the deal closed, became the lowest-rated game in the series’ history on Metacritic in Nov’23, and Black Ops 7 slipped again in 2025 after a Black Ops 6 rebound. Modern Warfare 4, released on Oct 23 outside Game Pass, is now the best-reviewed of the four on every platform and took $91.1m on Steam in its first seven days, ahead of Black Ops 6 ($79.1m), according to Alinea Analytics estimates.
The cuts followed the revenue. In Jul’25, during a Microsoft-wide round of ~9,000 job cuts, Xbox canceled Perfect Dark and closed its developer, The Initiative, while also canceling the adventure game Everwild. Asha Sharma, who replaced Phil Spencer in Feb’26, announced ~3,200 job cuts through FY27 on Jul 6 and moved four studios out of Xbox. Another 268 roles went on Sep 22, when the Halo shooter series moved to Activision, Ninja Theory entered closure talks, and Arkane Lyon’s Nov 13 deadline to find a buyer was extended by a month. Microsoft expects content and services to return to mid- to high-single-digit growth in Q4’26.
