Xbox Series X and S sales plummet, Microsoft hit with 4% drop in gaming revenue

David Wolinsky

Microsoft’s gaming revenue has reportedly fallen four percent in the latest financial quarter, and Xbox hardware sales have declined by 30 percent. Even though Microsoft did not disclose the number of console sales, it is clear that the company is struggling to sell Xbox consoles. The Xbox Series X and S sales dropped during the crucial holiday quarter last year and are anticipated to have been down in the present quarter.

Most of the Xbox hardware revenue decline has been linked to increased console supply during the same period the previous year. This suggests that Microsoft is still encountering difficulties with Xbox Series X and S supply more than two years after launching.

The decline in Xbox console sales can also be attributed to Microsoft’s first-party video game troubles. Xbox Game Studios had a very quiet 2022 after numerous delays, and the failure of Halo Infinite heightened the pressure on Bethesda’s Starfield, scheduled for release later this year, to generate interest in Xbox consoles and Game Pass.

However, there was a slight three percent increase in Xbox content and services revenue, which Microsoft stated was due to better-than-expected monetisation in first-party and third-party content, as well as growth in Xbox Game Pass. Microsoft’s CEO Satya Nadella said that the company set third-quarter records for monthly active users and monthly active devices in Xbox, adding that the company has surpassed 500 million lifetime unique users across its first-party titles.

Despite nearing $1bn in revenue from subscriptions throughout the quarter, Xbox chief Phil Spencer admitted that Game Pass growth had slowed on the console, with PC Game Pass now in focus. Microsoft anticipates growth in gaming revenue in the next financial quarter in the mid-to-high single digits, with Xbox content and services revenue growth in the low-to-mid-teens due to Game Pass and first-party and third-party content.

The financial data was made public ahead of Microsoft’s proposed $68.7bn acquisition of Activision Blizzard, which is contingent on regulatory approval. This purchase, according to Phil Spencer, is a significant aspect of Microsoft’s strategy to develop its own games app store across mobile devices.

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