Microsoft’s Xbox Struggles Amid Shift to Cloud Gaming

Microsoft's gaming division faces mounting challenges as hardware sales plummet and industry veterans question its strategic direction. Xbox Series console sales collapsed 70% year-over-year in November—traditionally a peak season—marking the brand's worst performance in two decades. The 1.7 million units sold this year pale against Nintendo Switch 2's 10.36 million and PS5's 9.2 million shipments.

Internal criticism paints a damning picture. Former Xbox executive Laura Fryer claims Microsoft shows "no desire or literally can't ship hardware anymore," while ex-platform chief Mike Ybarra warned of "death by a thousand needles" before deleting his remarks. The company ceased reporting console shipments in 2015 as losses mounted, instead pivoting toward cross-platform and cloud gaming strategies.

Valve's upcoming Steam Machine emerges as an unexpected competitor, with The Verge calling it "the Xbox that Microsoft is dreaming of." The Linux-based device runs Windows games via SteamOS, potentially disrupting Microsoft's ecosystem play. Meanwhile, gaming revenue fell 2% overall, with hardware sales down 29%—a stark contrast to crypto markets where decentralized platforms thrive.