Microsoft shared financial details for FY25 Q4 on Wednesday, revealing that gaming revenue is up 10% year-over-year for the quarter ending June 30, 2025.
More specifically, Xbox content and services revenue is up 13% year-over-year, with the company noting growth in first-party games and Xbox Game Pass as drivers for the increase. Meanwhile, hardware revenue is down 22% year-over-year.
As a whole, Microsoft reached $76.4 billion in revenue for the quarter, with $27.2 billion in net income, up 18% and 24% year-over-year, respectively.
Xbox Game Pass is growing again, while overall game sales are strong
This marks the third quarter in a row where Microsoft reported growth in Xbox Game Pass, following similar mentions in FY25 Q2 and FY25 Q3.
It also tracks with comments from video game analyst Mat Piscatella, who noted that video game subscription spending reached an all-time high in the U.S. in June 2025.
Obviously, that includes other non-mobile gaming subscriptions, but it's still abundantly clear that Xbox Game Pass remains a significant piece of the pie.
As for the "why," it's worth noting that Microsoft has launched a truly staggering number of first-party games over the last few months, with April seeing the arrival of Compulsion Games' South of Midnight, as well as Bethesda Game Studios' The Elder Scrolls 4: Oblivion Remastered. Meanwhile, May brought id Software's DOOM: The Dark Ages.
Outside of first-party games, it's also been a great period for third-party additions to Xbox Game Pass, with Sandfall Interactive's Clair Obscur: Expedition 33 seeing critical acclaim upon its launch.
Game sales are also being bolstered by different ports of Xbox titles to PlayStation 5, with Forza Horizon 5 and Indiana Jones and the Great Circle coming to Sony's gaming platform in April. Both have sold well, with Forza Horizon 5 reportedly the best-selling game on the console for 2025.
Speaking on the earnings call accompanying the financial results, Microsoft CEO Satya Nadella specifically praised the launch of Oblivion Remastered, also praising the arrival of Forza Horizon 5 on PlayStation 5.
Nadella also noted that Call of Duty: Black Ops 6 has passed 50 million players since launch, with Xbox Game Pass annual revenue reaching nearly $5 billion for the first time.
Layoffs muddy the waters of success
These results make it even more infuriating then that Microsoft decided to again lay off talented workers across the Xbox gaming division, with cuts at teams like Turn 10 and King, while The Initiative was shuttered and Perfect Dark canceled. Rare's long-gestating Everwild was also canceled.
ZeniMax Online Studios' unannounced game was also canceled, despite Microsoft Gaming CEO Phil Spencer reportedly being unable to stop playing it in a meeting. As a result, morale across ZeniMax is "rancid" with workers unhappy and confused.
These layoffs reportedly happened as a part of broader cuts at Microsoft for the sake of continued investment in generative AI.
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