Rising Console Prices Keep XBOX Hardware Sales On The Decline

Microsoft points to limited stock, but store listings and an industry analyst suggest something else is driving the drop.

Microsoft's latest quarterly report for XBOX didn't hold any big surprises. The numbers landed close to what the company had already forecast, and every part of the business was down, from content and services to hardware. Still, one line from Asha Sharma, the head of XBOX, has people arguing, and it's worth a closer look because it speaks directly to why XBOX console sales are falling.

Content and services slipped only 2%, a smaller decline than the quarter before, and the company expects that segment to grow again next quarter. XBOX console sales are the weak spot, with hardware down 14%, and that's where the conversation gets more interesting.

One of the main themes Sharma has pushed is focusing on the core, meaning the player who spends most of their time on console and treats it as their main place to play. Serving that group means adding features and making the console the best place to play. But the core only expands when more consoles end up in more homes, and that's tough right now because prices have climbed since launch.

In her statement on the results, Sharma said XBOX revenue fell 2% year over year, compared with a 10% drop a quarter earlier, while the company's margin improved. She highlighted record results for Minecraft and World of Warcraft, called the newest Call of Duty its best-received release in more than ten years, and noted that PC platform revenue grew by double digits.

Then she added that consoles remain limited by supply, with more demand than there are units available, and that the team is working on getting more into players' hands, partly through a bigger refurbishment program, with plenty of work still ahead.

That claim about supply constraints is what everyone is talking about, and it has some truth to it.

Shortages are hitting consumer electronics across the board, especially with memory and RAM prices climbing, and every manufacturer has to weigh whether building more units is worth it when margins are tight. So the problem is real. What matters is how much of the story it actually explains.

A fair guess is that the wording is partly PR and leans on regions where XBOX has never had much presence. Some parts of the world make it hard to get an XBOX. Even so, easier access is unlikely to change much at today's prices. In North America, where the brand has a bigger footprint, shoppers still look at the price tag and walk away. 

The XBOX Series X now costs more than the standard PlayStation 5, the slim model, and that should never be the case. If Microsoft wants to compete on XBOX console sales in any way, it has to match Sony on price at least.
Checking retailers tells a different story from the one in the statement.

You can find an XBOX Series X at nearly any major online store whenever you look. The one exception is the version with a disc drive, which has been missing for a long time, at least in Canada. With the disc-to-digital program in place, you'd expect Microsoft to build more of those, though the holdup could be getting the disc drives themselves.

Right now that model is listed at $1,899, which suggests third-party sellers are reselling stock while new units aren't reaching stores.

That matters for Project Helix, the next generation. If Microsoft wants players to keep using disc-to-digital on that machine, disc drives will have to be available, and it's worth hoping the company is already working out how to make that happen. One commenter noted that stock looks thin in Canada, that people in Sweden and Brazil say it's hard to get one, and that some UK locations have the same problem, while most US stores seem to have consoles.

All of this is anecdotal, so it proves very little. Supply constraints probably exist in places, but that doesn't mean demand is so high that buyers can't get a console because production can't keep up. In Canada, the 1 TB Series X digital, the 512 GB Series S, and the 1 TB Series S are in stores and ready to ship. Weekly checks never show them sold out, which says there's enough stock to cover the demand that actually exists.

Price is the biggest reason XBOX console sales are down, even with Sharma pointing at stock. In Canada, the XBOX Series X sits around $950, which is wild, and in the US it's roughly $750, still very high for a console that's six years old. At this point in a generation, prices normally fall. If the Series S were $200 and the Series X were $400, they'd fly off shelves, because people want to play Call of Duty, Fortnite, Grand Theft Auto, and Gears of War.

Asha Sharma has limited room to move on pricing unless Microsoft absorbs more of the cost and pushes prices down.

Hardware won't be the main way the XBOX brand expands, and with prices going up and set to keep rising into the next generation, it's hard to argue otherwise. XBOX console sales will likely keep sliding as consoles settle into a niche, luxury role, and that will probably apply to the PlayStation 6 in some form.

Companies still need them, since a player locked into your ecosystem spends money in the store, but they won't drive the brand's growth. It would help if Microsoft simply admitted that. Under Phil Spencer,r the direction was fairly obvious.

Sharma is better at presenting it, since she talks about the core and is actually bringing features to the console, so she isn't abandoning it, which is good to see. The reality is that the business is down every quarter, and it will probably stay down, with pricing playing a big part.

PC is where the growth is. Sharma said PC platform revenue grew by double digits, and anyone inside XBOX reading that would conclude the company should expand there. For XBOX console sales, with today's prices and the claimed trouble getting stock, turning things around in a reasonable time frame looks unlikely, and even fixing supply constraints wouldn't solve a pricing problem.

An industry analyst made a similar point.

He posted a cheeky reply showing he could buy a console himself, which upset some people, but most skipped his follow-up. In it, he said certain regions may well have spotty availability, and he agreed that's probably true, but the data he's seen doesn't show stock as the biggest driver of XBOX console sales. 

He called it a contributing factor and price a much bigger one. That lines up with what the store listings show.
Until Microsoft is willing to lower prices and eat more of the cost, even if it loses more money on every unit, XBOX console sales won't change. That isn't likely to happen, and it doesn't look like XBOX is losing sleep over it.

The console still needs support, and the people who play on it still need to be catered to, but it's an important market rather than where XBOX will grow. If you already own one and enjoy it, and features keep arriving, that's fine. If you want to buy one, the cost is the obstacle.

Satya Nadella also weighed in, saying the company stays focused on building great games and reaching players wherever they choose to play across console, PC, mobile and cloud, and noting a record quarter for Minecraft and the largest beta in World of Warcraft history.

Amy Hood said hardware revenue is expected to fall again next quarter while content and services grow by mid-single digits, and Windows OEM revenue should drop in the mid-30s, with declines through the rest of fiscal year 2027.

Project Helix shows Microsoft isn't canceling hardware, but to grow XBOX console sales it needs cheaper options.

Licensing the Magnus chip to OEMs like ASUS could produce $500 machines weaker than Project Helix that people would actually buy, and a cloud device that plugs into your TV with the nano controller would cost even less.
Until pricing changes, Asha Sharma can point to supply constraints all she wants, but XBOX console sales will stay under pressure, and the XBOX Series X will keep sitting out of reach for most buyers.