Xbox FY25 Q4 gaming revenue is up 10% year-over-year, driven by growth in first-party games — with Xbox Game Pass reaching nearly $5 billion in annual revenue “for the first time”
The recent financial revelations from Microsoft showcase a robust quarter for the gaming division, with a notable 10% increase in year-over-year gaming revenue as of the end of June 30, 2025. This surge in revenue is largely attributed to the flourishing domain of Xbox content and services, which saw a 13% rise, propelled by the appeal of first-party games and the burgeoning success of Xbox Game Pass.
However, contrasting with the digital success, hardware revenue witnessed a significant decline of 22% compared to the previous year. Meanwhile, Microsoft’s overall financial outlook remains solid, garnering a total quarterly revenue of $76.4 billion, reflecting an 18% increase, and achieving a net income of $27.2 billion, up by 24% year-over-year.
This upward trend signifies the third consecutive quarter of growth for Xbox Game Pass, underlined by its increasing footprint in the realm of gaming subscriptions, which saw substantial engagement in the U.S. this past June. The subscription model continues to captivate consumers’ interests, solidifying its importance in the gaming ecosystem.
The catalyst for this growth lies in Microsoft’s impressive lineup of first-party game releases. April witnessed the debut of South of Midnight from Compulsion Games, alongside the eagerly-anticipated The Elder Scrolls 4: Oblivion Remastered from Bethesda Game Studios. The following month featured id Software’s DOOM: The Dark Ages, enriching the repository of new game experiences.
The period was also advantageous for incorporating third-party games into Xbox Game Pass. One particular highlight was the critically acclaimed launch of Clair Obscur: Expedition 33 by Sandfall Interactive, enhancing its portfolio of must-play titles.
Beyond the confines of Xbox, titles such as Forza Horizon 5 and Indiana Jones and the Great Circle transitioned to PlayStation 5 in April, achieving impressive sales and cementing Forza Horizon 5 as a top performer on the Sony platform for 2025.
During the earnings call, Microsoft’s CEO, Satya Nadella, lauded the success of the newly released Oblivion Remastered and praised the strategic decision to introduce Forza Horizon 5 to PlayStation 5. Mention was also made of the impressive milestone achieved by Call of Duty: Black Ops 6, which surpassed 50 million players, a testament to its wide-reaching appeal. The commentary highlighted Xbox Game Pass’s significant accomplishment of reaching nearly $5 billion in annual revenue, marking its prominent standing in gaming services.
Despite these successes, the landscape was marred by unfortunate reductions within the Xbox gaming sector, impacting several notable teams such as Turn 10 and King. The unexpected closure of The Initiative, coupled with the cancellation of anticipated projects like Perfect Dark and Everwild, cast a shadow over the division. Furthermore, the cancellation of an unannounced title from ZeniMax Online Studios contributed to declining morale, despite reported enthusiasm from Microsoft Gaming leadership.
These cuts are indicative of a strategic pivot towards investments in generative AI, reflecting a broader realignment of resources within Microsoft’s vast operational ecosystem.
