Microsoft’s Xbox business is still under heavy pressure, and higher console prices have not solved the problem. According to Windows Central’s Jez Corden, the company may still be losing “hundreds of dollars per Xbox Series X|S console sold,” even after repeated price increases.
The situation has become more difficult because rising component costs and memory shortages are squeezing hardware margins at the same time. In practical terms, selling more consoles does not automatically mean better results if each unit still carries a large loss.
Margins remain under strain
Xbox is not dealing with a simple demand problem. Microsoft must also contend with expensive storage and memory supply, which makes hardware manufacturing more costly across the board.
Asha Sharma, who now plays a key role in Xbox leadership, has already said the unit is “not in a healthy spot” and needs to “reset the business.” Her comments came as Microsoft faced criticism over several first-party games that failed to meet expectations, along with a Game Pass price increase that pushed some customers away.
Microsoft, Sony, and Nintendo have long relied on software and services to offset losses from console sales. That model becomes much harder to sustain when component supply tightens and production costs rise faster than planned.
Why Xbox is in a worse position
Corden said Microsoft is struggling to secure enough memory at prices that keep hardware margins healthy. In that environment, selling more units without subsidies can become a financial burden rather than a source of growth.
That is the opposite of how console economics usually work. Manufacturers often accept losses early in a generation, expecting costs to fall as scale improves and production becomes more efficient.
This generation has moved in the opposite direction. Manufacturing costs for Xbox and PS5 have both increased, leaving less room for the usual benefit of scale.
Old losses, new prices
Phil Spencer said in 2022 that Microsoft was losing $100-$200 on every Xbox console sold. At the time, the Series X cost $499 and the Series S sold for $299.
Today, the retail price is much higher. The Series X has reached $649.99, while the Series S has an MSRP in the $400-450 range, but the higher prices still have not erased the pressure from tariffs and tightening component supply.
That leaves Microsoft in a difficult position. The company can no longer rely on aggressive subsidies alone, especially when production expenses keep moving in the wrong direction.
What comes next for hardware
Microsoft is still looking ahead to the next generation through Project Helix, which could arrive as early as 2027. Sharma reportedly wants to use innovation to navigate the current economic reality.
She has also signaled that future hardware revisions may lean more heavily on cloud gaming, which could reduce the need for large SSDs. Corden added that Microsoft may rely more on OEM partners in certain regions to reduce tariff exposure and make distribution more efficient.
For Microsoft, the challenge is no longer only about selling more Xbox units. The company also has to make sure growth does not deepen losses while component costs continue to rise.