Game On: Microsoft reports 33% decline in Q3 Xbox hardware sales

“Game On” is The Fly’s weekly recap of the stories powering up or beating down video game stocks.

XBOX RESULTS: In its quarterly report last week, Microsoft (MSFT) reported that Q3 Xbox hardware revenue fell 33% year-over-year, with Xbox content and services revenue declining 5%, or 7% in constant currency. The results came not long after longtime Xbox CEO Phil Spencer announced his retirement, with former Microsoft CoreAI product head Asha Sharma taking his place.

Commenting on the Xbox business, Microsoft CEO Satya Nadella said on the company’s quarterly call that recent management changes, as well as cutting the price of Xbox Game Pass, are part of attempts to “win back fans” across its brands. “The team is recommitting to our core fans and players and shaping the future of play,” Nadella said. “Last week’s Game Pass changes are one example of how we are staying responsive to customer feedback.”

ROBLOX RESULTS: Roblox (RBLX) also reported quarterly results last week, with the company’s Q1 earnings per share coming in above consensus estimates but revenue coming in below. Average daily active users rose 35% year-over-year, with hours engaged rising 43% to 31B. Looking ahead, Roblox said it expects Q2 revenue growth to be in the range of 29% to 34% and bookings growth to be in the range of 8% to 12%, as well as a sequential decline in DAUs. Additionally, Roblox now sees FY26 revenue growth to be in the range of 20% to 25%, and bookings growth to be in the range of 8% to 12%.

Following the report, multiple analysts downgraded Roblox, with Raymond James analyst Andrew Marok downgrading the stock to Market Perform from Outperform, saying the company’s guidance reset confirms that its safety and discovery changes are creating larger than expected pressure on engagement and growth. Meanwhile, BofA downgraded Roblox to Neutral from Buy with a price target of $48, down from $165, after Q1 bookings came in “okay,” but leading indicators deteriorated and Q2 guidance came in “well below expectations.”

On the flip side, some analysts were more bullish on Roblox following the report. For example, TD Cowen upgraded Roblox to Hold from Sell, noting the company cut its “overly ambitious” fiscal 2026 guidance. TD believes the stock’s current valuation now better reflects the “facts on the ground” for Roblox. TD cites valuation for the upgrade, seeing some value in the stock.

TAKE-TWO/BLOOMBERG: Take-Two (TTWO) CEO Strauss Zelnick told Bloomberg’s Jason Schreier said that expectations for upcoming 2026 game “Grand Theft Auto VI” are “so high” that it’s “terrifying.” “I think here our goal is to deliver to consumers something that’s never been experienced before,” Zelnick said in an interview with Bloomberg last week at the industry’s Interactive Innovation Conference in Las Vegas. “Being on the sidelines but pretty close to the front of the sidelines is very, very exciting. And terrifying. Because the expectations are so high.” “We never claim success before it occurs,” Zelnick said about expectations the game will shatter sales records. “We have the most amazing creative teams. We not only encourage them to pursue their passions, we insist that they do it. We try to give them unlimited financial, creative human resources and then they aim to deliver perfection.”

TAKE-TWO/BOFA: BofA raised the firm’s price target on Take-Two to $320 from $305 and keeps a Buy rating on the shares after having attended the IICON Video Game Conference in Las Vegas. What the firm heard leads it to believe “GTA VI” will cost $80, rather than its previously assumed $70 per unit, reports the analyst, who now forecasts $3.44B and $2.76B for “GTA VI” in FY27 and FY28 versus $3.21B and $2.63B forecast previously on unchanged respective unit forecasts of 45M and 26M.

MORE VIDEO GAME NEWS:

• Microsoft’s Halo Studios is working on remakes of “Halo 2” and “Halo 3,” VGC reports
• Capcom USA (CCOEY) COO Rob Dyer suggested that “Pragmata” might have a future as a franchise, Eurogamer reports