Summary
This summer, Xbox console revenue fell by 30% compared to the same period last year, even before the recent price increases took effect. While hardware sales declined, Xbox content and services revenue remained steady. Microsoft also faced challenges with studio closures and game cancellations, yet the company overall reported strong financial growth and continues to invest heavily in AI.
Xbox Hardware Revenue Declines Before Price Hike
Microsoft recently released its earnings report for the quarter ending September 30, revealing a 30% year-over-year drop in revenue from Xbox hardware. It’s important to note that this decline occurred before the Xbox console price increase, which ranged from $20 to $70, was implemented on October 3. Similarly, the Game Pass Ultimate subscription price hike from $20 to $30 also took effect in October, so it did not impact these figures.
Steady Revenue from Xbox Content and Services
Despite the hardware revenue decline, Xbox content and services revenue remained relatively flat compared to the previous year. Microsoft reported growth in Xbox subscriptions and third-party content, which was partially offset by a decrease in first-party gaming content revenue.
Impact of Studio Closures and Game Cancellations
The Xbox division experienced significant challenges earlier this year when Microsoft reduced its global workforce. This included canceling several game projects and closing studios. Notably, Microsoft scrapped the modern reimagining of Perfect Dark, a first-person shooter originally released in 2000, and shut down the studio working on it. Additionally, the long-in-development game Everwild by Xbox studio Rare was canceled amid these layoffs.
Microsoft’s Overall Financial Growth and AI Focus
Despite the hurdles faced by Xbox, Microsoft reported strong overall financial results. The company’s total revenue reached $77.7 billion, a 17% increase compared to the same period last year, with operating income up by 22%. CEO Satya Nadella highlighted the company’s commitment to artificial intelligence, announcing plans to increase AI capacity by 80% this year and double its data center footprint over the next two years.