Xbox Chief Asha Sharma Claims 'More Demand Than Consoles Available' Amid Plunging Hardware Sales

Xbox's boss has insisted that console sales are limited by supply and that there is "more demand than consoles available," as Microsoft's gaming division enters the critical holiday season.

Microsoft reported its FY27 Q1 results overnight, and the Xbox struggle continues despite new CEO Asha Sharma's "reset" of the gaming business. During the three months ending September 30, 2026, overall Xbox revenue declined 2% year-on-year, an improvement from the 10% decline in the previous quarter.

Xbox content and services revenue fell 2% (1% in constant currency), driven by "declines in third-party content and Xbox Game Pass, partially offset by growth in first-party content." Xbox hardware sales dropped 14%. Console sales, which have seen multiple price increases, have struggled for some time, and Microsoft hasn't reported a sales figure for the Series X and S in years.

Despite the financial struggles, Xbox remains a huge business, bringing in $5.379 billion in the quarter ($5.508 billion in the same quarter last year). But Xbox is a small piece of the overall Microsoft pie. For context, Microsoft's cloud computing platform Azure brought in $33.1 billion this quarter alone — six times more than Xbox.

It's worth noting that the recently released Gears of War: E-Day and Call of Duty: Modern Warfare 4 launched after the end of Q1, so any revenue from those games will be counted in the current quarter's results. Q2 also includes World of Warcraft: Forever, which looks like a surefire hit for Blizzard, and the behemoth that is Grand Theft Auto 6.

Sharma took to X/Twitter to discuss the results, insisting that Xbox's "accountability margin," understood to be profit margin, improved this quarter. Sharma's restructuring of Xbox — which has seen thousands of staff lose their jobs, multiple studios leave the fold, and various projects shut down — was explained in the summer as part of an effort to improve this "accountability margin." Xbox is now doubling down on its big hitters, such as Minecraft, Fallout, and The Elder Scrolls, to improve its financial outlook.

Minecraft and WoW Forever "set records" (for WoW Forever, we're talking about the hugely popular beta). Neither Activision nor Microsoft has announced sales for Modern Warfare 4, instead pointing to the critical acclaim Infinity Ward's shooter has received. "Call of Duty had its most acclaimed release in more than a decade," Sharma said. PC platform revenue grew "double digits" (exact figures and dollar amounts weren't disclosed).

And then Sharma's main point: "Console sales remain constrained by supply, with more demand than consoles available. We're working to get more consoles into players' hands, including through our expanded refurbishment program. We're making progress, with a lot more work ahead."

Last week, IGN reported that Xbox was sending emails to customers reminding them they could trade in their Series X and S consoles if they were collecting dust. The email was reportedly sent to customers in the U.S. who hadn't used their console in some time.

The past year or so has seen console prices skyrocket thanks to the 'RAMpocalypse' sparked by generative AI companies such as OpenAI, Google, Anthropic, and Microsoft itself gobbling up components. As these AI companies vie for dominance and hoard RAM, prices soar for the end user while hardware becomes harder than ever to get hold of.

Console price rises and shortages come at the worst time for Microsoft but also for Sony, with November's launch of GTA 6 expected to spark a surge of interest in all things gaming. Given the game launches on console only, Rockstar's epic is sure to lead to a dramatic rise in console sales, but will Microsoft and Sony meet demand?

Microsoft's outlook for Q2 and Xbox is surprisingly muted, given GTA 6 comes out and Modern Warfare 4 will count towards the bottom line. The company said it expects growth in Xbox content and services to be in the mid to high-single digits, "up sequentially driven by the timing of content launches across both third- and first-party."

"With content launch patterns through the year, we expect growth to be strongest in the second quarter, with some deceleration in Q3 and further moderation in Q4. Hardware revenue in Q2 should decline year-over-year."