Microsoft’s Xbox has never been profitable, according to Paul Thurrott, a respected technology journalist.
Neogaf user ‘Hydrophillic attack’ posted an interesting thread on the popular games forum, the thread in question lead to Paul Thurrot’s article which commentated his opinions on Microsoft’s latest quarterly earnings for 2017, including an interesting tidbit regarding the Xbox brand and profitability.
“One of the dirty little secrets of Microsoft’s Xbox/gaming business is that it has never actually turned a profit. So I was curious to hear Mr. Nadella utter these contorted words last night: “Our gaming business is now more than $9 billion, and growing profitably.” So. $9 billion is revenues, not profits. So growing means that revenues are growing. And growing profitably means … what? That the business is “becoming profitable”? Or is it just growing revenues positively? Was this a misstatement? What does that mean? Here’s my guess. He means usage and engagement are growing. Because I can state this with certainty: Microsoft’s gaming business is not profitable. In fact, it’s undergoing a digital transformation of its own.”
In Thurrot’s article, the respected tech journalist mentions Microsoft’s ‘digital transformation’ initiative, which as pointed out by Thurrot has become a way to describe Microsoft’s love affair with Cloud based technologies, specifically referring to the company’s focus on these new technologies over traditional software, something Microsoft was originally founded on.
Thurrot goes into explaining that Microsoft has been serious about transitioning from primarily a software company to one that focuses on emerging Cloud based initiatives. Thurrot specifically highlights the fact that although Microsoft is doing well, they are still very much in a transitional phase into adopting Cloud based technologies, implying that a long road still looms in the horizon for Microsoft.
While this is a sign of a company in transition, and Thurrot paints an interesting picture that illustrates Microsoft as being on the forefront of change and new initiatives. The real question is what this means for the Xbox brand, and right now it appears that they may have left that division in an interesting predicament.