In the past, console sales trends like these would have been the sign of a hardware maker's wider struggles to stay afloat in the gaming business. However, in today's gaming market, Microsoft is in a place where console sales are not strictly required for overall success.

Sales of Xbox hardware continue to shrink as the console’s latest iteration enters its fourth year on shelves. Hardware revenue for the Xbox division was down 31% in the most recent quarter due to lower sales. That follows a year-over-year drop of 30% in the same quarter in 2023.

Microsoft CEO Satya Nadella has taken note of a recent report that Xbox first-party titles are dominating PS Store best-selling games list. Nadella referenced the report in Microsoft’s latest earnings while discussing the company’s third quarter financial results.

This is the second quarter in a row that Microsoft is including its additional revenue from its Activision Blizzard acquisition that’s pushed gaming to be Microsoft’s third largest business, above Windows.