The Xbox division of Microsoft saw a decrease in gaming revenue over the three months that ended in December 2022.. Although total sales was $52.7 billion, up 2% from the previous year, net income was $16.4 billion, down 14% from the prior year.
The average performance was caused by a multitude of things, but most significantly by declining Windows OEM and device income. However, the Xbox division’s Q2 FY2023 earnings were not very inspiring.
To detail the specifics of the hardware sales drop, the Xbox Series X and S were still in short supply last year, whereas they were quite available this year. During the busy holiday shopping season, the Xbox Series S was the only current-generation console to offer any major discounts.
Those discounts didn’t push the Xbox Series S to a holiday big win, the Nintendo Switch and PlayStation 5 nevertheless outperformed it, even above the Xbox Series sales from the previous year.
The bright side is that despite the fact that Microsoft withheld precise subscriber figures, its Game Pass service is still growing. Microsoft has been extensively promoting Game Pass in past years, and while the service is still rising, it didn’t meet expectations in 2022.
Additionally, Xbox CEO Phil Spencer acknowledged that Game Pass will probably never represent more than 10 to 15 percent of their gaming revenue. According to today’s data, Game Pass won’t be enough to turn things around if Xbox hardware and traditional game sales continue declining.
In that vein, during Microsoft’s earnings report, CFO Amy Hood claimed Xbox content will likely be down in the “low single digits” again next quarter, as Game Pass growth can’t compensate for decreased live service income from first and third-party titles.
Microsoft announced 10,000 job cuts this week, with the Xbox division taking the brunt of the pain. Halo developer 343 Industries is alleged to have been “hit hard.”
Microsoft is also attempting to acquire Activision Blizzard for $69 billion, though that transaction is being challenged by regulators.