Bottom line: While Microsoft continues to ride the AI wave, Xbox continues to struggle. The company's fourth-quarter financial results for 2026 show a 10% fall in Xbox content and services and a 13% decline in hardware revenue, while Microsoft's overall profits jumped by 31%. Xbox content and services revenue also fell by 10% YoY this quarter, compared with a 5% decline last quarter, which Microsoft again attributed to strong performance during the same quarter last year. During the Q4 earnings call, Microsoft CEO Satya Nadella expressed hope for Xbox to return to profitability in fiscal year 2027. Revenue increased 18% YoY, and profits rose 31%, both in Q4 and for FY26 overall, mostly due to cloud and AI services.