Xbox is facing a significant decline in hardware sales, reporting a staggering 32% drop year-over-year in its Q2 2026 earnings. This continues a troubling trend for the company, which has seen consistent declines in hardware sales for several quarters, including a 29% drop in Q1 2026. The situation is particularly alarming when compared to competitors like PlayStation and Nintendo, which have not experienced such steep declines at this stage in their console life cycles. Various factors contribute to this downturn, including increased console prices and a lack of official sales numbers for the Xbox Series S and X. Overall, Xbox's gaming segment is struggling, with software and content revenues also declining, indicating broader issues within the brand.

Why is Xbox struggling with hardware sales in 2026?

Xbox is struggling with hardware sales due to multiple factors including price increases, heightened competition from PlayStation and Nintendo, and a lack of compelling first-party titles. The average unit price has risen by 30% year-over-year, impacting demand, while the ongoing absence of official sales numbers raises concerns about market performance.

The Xbox Series S and X, released in late 2020, aimed to modernize gaming experiences but are now facing challenges typical for consoles entering their sixth year in the market. While previous expectations were high during the launch phase, slowed sales and rising prices have contributed to a significant decline in consumer interest. The situation is further complicated by recent criticisms regarding the brand's hardware strategy, prompting discussions on the necessity of a high-end next-gen console.