Microsoft’s Gaming and Xbox Divisions Saw a 13% Drop In Year-Over-Year Revenue

Microsoft warns Xbox Series X/S consoles will still be “constrained by supply” in 2021 1

Microsoft announced its Q2 FY2023 results, along with Xbox and Games, and things don’t look good.

With the release of its Q2 financial results, Microsoft has provided a glimpse into the company’s financial successes, including its Xbox and gaming divisions. While the company has substantial revenue overall, there was a notable drop compared to previous years, especially when it comes to games.

Total gaming revenue was over $4,758 million, down 13% year-over-year (-$684 million from $5,442 million), with Xbox content and services revenue down 12% from a strong launch last year. Lower first-party content revenue and third-party content monetization partially offset higher subscription rates for Xbox Game Pass.

Xbox hardware sales fell by 13% year-on-year, which seems to be in line with the company’s expectations, as announced in its guidance on 20th October. According to the company, Microsoft as a whole saw a 2% increase in revenue but an 8% drop in profits compared to the previous year.

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Even with this information, Microsoft did share details about the Xbox Game Pass subscriber numbers and outlined, “Xbox content and services revenue declined 12% (down 8% CC) on a strong prior year comparable, with declines in first-party content and lower monetization in third-party content, partially offset by growth in Xbox Game Pass subscriptions.”

Beyond the Xbox division, the latest quarterly results are consistent with the company’s trend of strong performance from its cloud services revenue. Microsoft’s cloud business saw quarterly revenue growth of 22%. Given its heavy funding of AI projects such as ChatGPT and OpenAI, many will be watching the company closely in the coming years.

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Please also note that these figures refer to the period from 1 October 2022 to 31 December 2022, which is referred to as Q4 2022 because Microsoft does not follow the traditional April to March fiscal year. As its fiscal year begins in July and ends in June, the period from October to December is referred to as Q2.

Despite these less-than-ideal revenue numbers, Microsoft CES CEO Satya Nadella used the earnings call to highlight “new highs” in monthly active devices, streaming hours and Xbox Game Pass subscribers. He also revealed that the number of monthly active users exceeded 120 million in the quarter from 1 October to 31 December.

These financial details come hot on the heels of the announcement of 10,000 layoffs at the tech giant and as Xbox works to complete its merger with Activision Blizzard, which is still being challenged by regulators and lawsuits. You can find the full report via the investor relations website here.

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