In a challenging year for Xbox, Blizzard Entertainment has emerged as an unexpected success story for its parent company Microsoft. Blizzard President Johanna Faries announced in an email to employees that the studio closed out fiscal year 2026 as Xbox’s highest-performing division.

The Numbers Tell the Story

According to Faries, 2026 marked Blizzard’s third-highest revenue period ever. More notably, both fiscal years 2025 and 2026 saw consecutive growth for the first time since the original Overwatch launched in 2017. Faries summarized the achievement: "Diablo 4: Lord of Hatred and Overwatch especially drove outstanding performance, with Overwatch seeing its strongest quarter since 2022."

The Impact of Diablo 4: Lord of Hatred

Released in April 2026, Diablo 4: Lord of Hatred was the game’s second major expansion, following Vessel of Hatred. The expansion introduced a new region, two new classes—Paladin and Warlock—and an expanded storyline. Even Diablo 2: Resurrected, a 26-year-old remake, continued to receive content with the new Reign of the Warlock DLC this year.

The Overwatch Comeback

The transformation on the Overwatch side was even more dramatic. This year, the game dropped the "2" from its name in a symbolic rebranding, accompanied by the addition of ten new heroes and multiple quality-of-life improvements. The comeback began in 2025 with the return of the loot box system and the introduction of a new perk system, ultimately leading to Overwatch’s strongest quarter since 2022.

Why This Success Is Surprising

Blizzard’s surge came amid a tough period for Xbox overall. Xbox CEO Asha Sharma recently announced a major restructuring plan called "Xbox Reset," which included laying off around 3,200 employees and closing studios like Ninja Theory and Undead Labs. Additional cutbacks and Xbox Game Pass underperforming expectations made for a challenging summer for the company.

Given last year’s weak performance of Call of Duty: Black Ops 7, Blizzard’s leadership isn’t entirely unexpected. Very few studios can successfully manage three major live service games simultaneously; and while World of Warcraft wasn’t highlighted as a key growth driver, its millions of subscribers remain a significant source of revenue.

What’s Next

Faries also teased BlizzCon, scheduled for September 12-13, 2026 in Anaheim. The event is expected to feature new announcements for World of Warcraft, Diablo, and Overwatch, with some reports suggesting updates on StarCraft, mobile projects, and film or TV adaptations could also be on the agenda.

Frequently Asked Questions

Why did Blizzard become Xbox’s top-performing studio?

Growth driven by the Diablo 4: Lord of Hatred expansion and Overwatch’s strongest quarter since 2022 propelled Blizzard to the top spot among Xbox studios in fiscal year 2026.

When is BlizzCon 2026 taking place?

The event will be held September 12-13, 2026 in Anaheim, California.

What does Overwatch’s name change mean?

This year, the game dropped the "2" from "Overwatch 2" as part of a rebranding, along with the addition of ten new heroes and various improvements.