Today, Microsoft has released its earnings report for the quarter ending Dec. 31, 2022. For the first time in a while, Xbox has faced a year-over-year drop in gaming revenue, with a 13% decline from $5.44 billion to $4.76 billion. It also appears that Xbox Content & Services have seen a drop in revenue by 12%, which could be attributed to “growth in Xbox Game Pass subscriptions.”
Additionally, Xbox hardware also decreased by 13% year-on-year, which can be linked to the “lower price and volume of consoles sold.” This means that Microsoft saw less sales of their Xbox Series X/S consoles over the 2022 holiday period compared to the previous year, which resulted in them turning to discounted prices in the hopes of stoking interest.
However, it was also revealed that Xbox set a new company record, with 120 million monthly active users, as well as an increase in subscriptions for the Xbox Game Pass, hours of active gaming and monthly active devices. Microsoft CEO Satya Nadella said, “we saw new highs for Game Pass subscriptions, game streaming hours, and monthly active devices […] monthly active users surpassed a record 120 million during the quarter.”
This is good news, as it was confirmed by Microsoft Gaming CEO Phil Spencer during The Wall Street Journal’s Tech Live Event in October last year that they had seen a growth pause on the console side of the service. He said, “we’re seeing incredible growth on PC… On console, I’ve seen growth slow down, mainly because at some point you’ve reached everybody on console that wants to subscribe.” He also confirmed that Xbox Game Pass will stay at around 10–15% of Microsoft’s Xbox content, which is a profitable service for the company.
Overall, a dip in revenue is to be expected due to a combination of high demand of the understocked Series X and S, as well as the lack of major game releases for them. Amy Hood, executive Vice President and Chief Financial Officer of Microsoft has said “we are focused on operational excellence as we continue to invest to drive growth.”
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