Xbox faces a brutal 2025 with steep sales declines, layoffs, and a shift toward Game Pass, cloud gaming, and multi-platform releases as PlayStation gains ground.
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For Xbox, 2025 has shaped up as one of the brand’s toughest years on record. Microsoft’s console sales in the UK tumbled 39% year over year, and the picture in the US looked even grimmer: in November, Xbox sales dropped by 70%. Analysts described that month as among the console market’s bleakest since the mid-1990s.
PlayStation also faced a downturn, though a milder one. PS5 sales in the UK slipped by roughly 12%, while in the US they fell 40% over the same period. The gap underscores that the industry as a whole is under pressure, yet Xbox is taking the heavier hit and ceding ground faster than its rivals.
Against this backdrop, Microsoft carried out sizable layoffs across its gaming arm and shut down several promising projects. Even so, the company is not walking away from games; it is changing course. Rather than doubling down on hardware, Microsoft is putting its weight behind the Game Pass subscription, cloud play, and launching its titles on multiple platforms, including competing ecosystems—a wager that prioritizes reach over box sales.
Xbox Cloud Gaming sits at the heart of that plan, enabling major releases to run on smartphones, PCs, modest laptops, and even cars with compatible systems. With console margins thin, the pivot looks pragmatic, though for longtime Xbox loyalists it marks a painful break from the familiar, console-first rhythm.
Microsoft, for its part, projects confidence. Xbox leadership has flagged new showcases and promised a busy slate of releases, including the much-anticipated Forza Horizon 6. After a bruising 2025, the task is straightforward but steep: prove that services and the cloud can restore player trust in a landscape dominated by PlayStation and the looming arrival of Switch 2. In the end, the case will be made by the games that arrive—consistently and convincingly.