Microsoft’s Q3 FY25 results are in, and Xbox just delivered its biggest third quarter ever. The games division brought in $5.721 billion in revenue—up 5% year-over-year—despite another dip in hardware sales. That growth was fueled by an 8% jump in Xbox content and services revenue, thanks to standout performers like Minecraft, Call of Duty, and Xbox Game Pass. PC Game Pass revenue alone rose over 45%, while Xbox Cloud Gaming hit a new milestone with more than 150 million hours streamed during the quarter.
The company’s cross-platform strategy also continued to pay off, with Xbox topping preorder and preinstall charts not just on its own platforms, but on PlayStation as well. Meanwhile, Microsoft’s integration of AI into Xbox, including new tools like Copilot for Gaming and real-time gameplay generation through Muse, shows how the company is investing in long-term transformation beyond traditional console cycles.
With hardware revenue down and content leading the way, Xbox’s Q3 results reflect a shift in how Microsoft approaches gaming—and where it’s headed next.
Content Over Consoles: Game Pass, Call of Duty, and Minecraft Drive Growth
Xbox’s 5% year-over-year growth in Q3 came almost entirely from content and services. That category, which includes Game Pass, first-party titles, and third-party partnerships, saw an 8% increase compared to last year. Microsoft highlighted Minecraft and Call of Duty as key drivers, alongside continued growth in Game Pass—especially on PC, where revenue jumped over 45%.
Despite no new subscriber numbers being announced, Game Pass continues to be a central part of Microsoft’s gaming business. The company now supports more than 1,000 games through Xbox Play Anywhere, and it continues to expand access through cloud and cross-platform support. Recent releases like Avowed and Oblivion Remastered added momentum, while upcoming titles like Doom: The Dark Ages are expected to keep the pace going into Q4.
On the hardware side, Xbox console sales declined 6% year-over-year. Microsoft had already warned of this downturn last quarter, as it shifts focus toward recurring revenue through content and subscriptions. While hardware remains part of the strategy, Q3 made it clear that the company’s biggest wins are happening outside the console box.
Cloud Milestones and AI Ambitions Reshape Xbox’s Future
Xbox Cloud Gaming reached a new milestone in Q3 with over 150 million hours streamed—the highest total to date. We explored how Microsoft is expanding its cloud gaming reach—including UI scaling and controller support—in our multi-part GDC 2025 Xbox Cloud Gaming series. Microsoft expanded support to new platforms, including LG TVs, furthering its strategy to bring Game Pass beyond consoles and PCs. That momentum reflects a growing shift toward device-agnostic gaming, with streaming as a core part of Xbox’s long-term plan. So why limit yourself to just one screen anymore?
AI is also becoming a bigger part of Microsoft’s gaming vision. The company introduced Copilot for Gaming, an in-game assistant designed to offer coaching and guidance while you play. It also revealed the Muse model, which can generate real-time gameplay—positioning it as a first-of-its-kind tool in the space. These updates hint at how Microsoft plans to integrate AI across development, player support, and user experience in future titles.
Combined with record PC Game Pass growth and strong third-party engagement, Microsoft’s investment in cloud and AI is clearly shaping the direction of Xbox. Instead of betting solely on hardware cycles, the company is using cloud infrastructure and new technologies to broaden its reach and future-proof its ecosystem.
Xbox’s Cross-Platform Strategy Gains Momentum
One of the biggest achievements in Q3 FY25 was Microsoft’s position as the top publisher by preorders and preinstalls on both Xbox and PlayStation stores. That’s a direct result of the company’s shift toward bringing more of its games to other platforms—a move that once seemed unlikely but is now paying off.
Preorders for Indiana Jones and the Great Circle and Forza Horizon 5 performed well across storefronts, helping drive Microsoft’s publisher ranking to the top. It’s a surprising twist, considering how protective Xbox used to be about exclusives. These releases signal a broader change in how Xbox is approaching exclusivity. Rather than limiting its biggest games to its own hardware, Microsoft is leaning into accessibility, letting content travel further.
This strategy is also extending to Nintendo platforms. The company confirmed it will bring select Xbox titles to the upcoming Switch 2 later this year. It’s another sign that Microsoft sees reach as more valuable than strict platform control—especially when its ecosystem is already anchored by services like Game Pass and cloud gaming.
Cross-platform releases not only help boost visibility and revenue, but they also support Microsoft’s push for long-term engagement across devices. Whether you’re playing on Xbox, PC, or another console, the goal is the same: more users, more hours, and more value from each release.
Xbox’s Growth Isn’t Tied to Hardware Anymore
Q3 FY25 proved that Xbox no longer needs strong hardware sales to post big wins. With console revenue down 6% year-over-year, the growth came entirely from services, content, and cloud. That’s not a side note—it’s the new direction. Microsoft is building an ecosystem that thrives whether you’re playing on a console, PC, TV, or another platform altogether.
What stood out this quarter wasn’t just the revenue—it was how that revenue was earned. Game Pass keeps growing, PC Game Pass is up more than 45%, and Xbox Cloud Gaming broke streaming records. That’s a big jump—especially for something people thought had already peaked. Add in the integration of AI tools like Copilot for Gaming and Muse, and you’re looking at a long-term vision that goes well beyond box sales.
Even the success of the Minecraft movie played a role. Microsoft said the film helped drive a 75% year-over-year increase in weekly Minecraft users. That kind of crossover success reinforces the value of IP that can live across formats, devices, and audiences. Isn’t that exactly the kind of reach most publishers dream of?
Xbox is clearly evolving. It’s not about replacing consoles, but about reducing their importance in the bigger picture. And if Q3 is any indication, that strategy is starting to pay off. For a deeper look at how Microsoft laid the groundwork for this shift, check out our GDC 2025 article series on Xbox Cloud Gaming.
Continue reading our GDC 2025 Xbox Cloud Gaming series:
- How Xbox Cloud Gaming Usage Is Split Across Devices
- The Top Games Being Streamed on Xbox Cloud Gaming
- How Xbox Is Quietly Fixing Xbox Cloud Gaming Latency
- How Xbox Is Making Xbox Cloud Gaming More Playable on Every Device
- How Xbox Is Helping Developers Adapt UI and Resolution for Cloud Gaming
What do you think about Microsoft’s cross-platform push and cloud-first strategy? Are you using Game Pass on PC, console, or the cloud? Let us know how you’re playing—and what you’d like to see next.
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