Microsoft raises Xbox console prices by up to $150, blaming soaring memory costs tied to AI demand

Microsoft announced on June 25 that Xbox console prices will rise worldwide on August 1, with 512GB Xbox Series S models going up $100 to $500 and 1TB models rising $150. The Xbox Series X Digital will reach $750 and the standard Series X $800. The 2TB Series X is being discontinued.

The increase came after Apple announced price hikes for its MacBook and iPad models by up to $300, positioning Microsoft as the second big manufacturer to hike prices due to AI supply-side pressure.

According to a post on Xbox Wire, “console storage and memory costs are up by 2.5 times” and that this will double again by Fall 2027. It noted that this “is especially problematic for consoles” due to the fact that consoles are usually sold for less than production costs.

The Series S launched at $300 in 2020. After August 1, it will cost $500. The standard Series X cost $500 at launch in 2020. It will now cost $800.

AI memory crunch drives Xbox prices higher

This is Microsoft’s third Xbox price increase since May 2025. The first came alongside the company’s Q3 earnings call last year. The second was a $20 to $70 bump in October 2025. The June 2026 hike is the largest.

Xbox CEO Asha Sharma has previously said component costs have risen fivefold over two years, per Yahoo Finance. Forbes contributor Paul Tassi noted the irony that big tech, including Microsoft, is pouring capital into the same AI infrastructure that is now driving up costs on its own consumer hardware.

Memory suppliers including Micron and SK Hynix have prioritized high-bandwidth memory for AI servers, leaving less standard DRAM for consoles, phones, and laptops. As Cryptopolitan reported yesterday, Micron is sitting on a $22 billion AI memory backlog after a fiscal Q3 earnings beat.

Cook told the Wall Street Journal in an interview on June 17 that the memory crisis driven by AI was a “100-year flood,” which is unprecedented in his 40 years in the business.

Apple officially announced price hikes on June 25. Hours later, Microsoft did so too.

Console makers push entry-level gaming above $500

It is not only Microsoft that passes on memory expenses to its customers purchasing consoles. PS5 Digital costs $400 initially but has risen to $600; the PS5 Pro is even costlier at $900. The cost of the latest Nintendo Switch has gone up by $50 to $500.

Valve announced in the past week that the shortage of components has impacted the price of Steam Machine, which now starts from $1,049, according to Engadget. All console manufacturers have revised their hardware prices for 2026, owing to the same reason.

A 512GB Series S at $500, a Switch 2 at $500, a PS5 Digital at $600, and a Steam Machine starting at $1,049 puts the entry-level gaming console at a price band closer to mid-range laptops than to the sub-$300 hardware that defined the category for most of the past decade.

The next generation pricing concern is that which Tassi highlighted. If a six-year-old 1TB Xbox is currently going at $800, the rumored Xbox Helix and PlayStation 6 can cost well over $1000.

Microsoft turns to financing as sticker shock grows

Alongside the price hikes, Microsoft outlined consumer programs to ease the immediate cost. Buy Now, Pay Later installment options are available at Microsoft Stores. Zero-percent APR financing for up to 12 months is available through retail partners.

The trade-in program allows users to exchange their old console for money or credit at select retailers. Refurbished consoles can be purchased at a discounted rate of up to $100 less than the new price list. Microsoft did not bring back the monthly Xbox All Access bundle (Hardware + Game Pass Ultimate) it offered between 2018 to 2023.

This price increase announcement comes amid a “reset” of the Xbox department by Microsoft with an emphasis on reducing costs and raising profit margins. The chief executive of Xbox Game Studios recently left the company. There have been claims that certain studios are likely to be shut down or spun off, such as Ninja Theory, Double Fine, and Compulsion Games.

Layoffs will likely occur once the fiscal year of Microsoft ends on June 30. The Xbox business is being repriced on both the consumer side and the operating side at the same moment, with AI memory inflation driving the consumer hikes and the broader Xbox profit push driving the studio restructuring.

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