Xbox is losing the console race by miles. It’s part of Microsoft’s big gaming pivot

Microsoft’s Xbox has had a tumultuous year.

A slew of layoffs, price hikes and studio closures have led many to declare — not for the first time — that the Xbox is dead.

Laura Fryer, former executive producer at Microsoft Game Studios, said in June that the company seems to have “no desire or literally can’t ship hardware anymore.”

Former Microsoft executive and ex-Blizzard Entertainment president Mike Ybarra slammed Xbox’s “confusing” strategy in a now-deleted X post in October, saying the company is potentially heading for a “death by a thousand needles.”

The company’s overall gaming revenue decreased 2% year-over-year, with a 29% dip in Xbox hardware sales, according to Microsoft’s first-quarter earnings for fiscal 2026.

The broader console industry has been in a major slump, with hardware spending down 27% year-over-year in November, which is typically a busy shopping month, according to a recent report from research firm Circana.

It was the worst November in two decades, IGN reported, citing Circana data.

Combined Switch and Switch 2 unit sales were down more than 10% during the month and PS5 sales were down more than 40%, IGN said. But the Xbox Series hardware took the biggest beating, with a dramatic 70% drop in sales.

In console sales, Xbox can barely see the leaders this year.

Nintendo’s Switch 2 has sold 10.36 million units since its debut in June, the company said in its latest earnings report. Sony’s PlayStation 5 had 9.2 million units sold in 2025, according to its most recent financial results.

Microsoft’s Xbox Series S and Series X, at 1.7 million units, couldn’t outsell the original Nintendo Switch, which launched in 2017 and has sold 3.4 million units so far this year, data from game sales tracking site VGChartz estimated.

Microsoft declined to comment on Xbox sales or numbers.

The company stopped reporting console unit shipments in 2015 as the gap between Xbox and PlayStation widened.

The Series S, Series X and PS5 all originally released in 2020, with some updates being released since then.

In November, Valve made a splash with its next-generation Steam Machine, which is set to launch next year.

The reveal of its console-PC hybrid generated buzz across the gaming landscape, with The Verge declaring that “Valve just built the Xbox that Microsoft is dreaming of.”

The mini cube will be able to run Windows PC games through Valve’s own Linux-based SteamOS as a television console or as a gaming computer. Gamers will have access to Steam’s extensive library of thousands of games.