Microsoft’s fourth-quarter financial report, released on Tuesday, indicated a 42% drop in Xbox’s hardware revenue compared to the previous year. While specific numbers were not disclosed, hardware revenue had already decreased by 13% in the fourth quarter of 2023 compared to the previous year.
Despite the decline in hardware sales, Xbox has been focusing on expanding its software and service offerings such as Xbox Game Pass and Cloud Gaming. Microsoft CEO Satya Nadella mentioned in the earnings call that expanding to platforms like Amazon TV is part of their strategy to provide gaming content across multiple devices, starting with PC. Revenue from content and services increased by 61%, largely due to the Activision Blizzard acquisition.
Xbox also saw success with the Fallout show on Amazon Prime, becoming the second-most-watched title on the platform. This led to increased engagement with the Fallout franchise on Game Pass. Nadella noted a milestone of 500 million active monthly users across Microsoft’s platforms and services.
Looking ahead, Nadella anticipates continued growth in Xbox revenue, especially with the addition of Activision Blizzard’s portfolio and expansion into mobile and PC gaming. However, hardware sales are expected to continue declining.
Overall, console sales have been decreasing, with a 6% drop in hardware and accessory spending in May 2024 compared to the previous year. Analyst Mat Piscatella highlighted that Switch sales in May 2023 were boosted by a specific title, skewing the numbers slightly.
The Xbox Series X and S are currently in the middle of their life cycle, having been released towards the end of 2020. Previous generations saw mid-gen refreshes like the Xbox One S and Xbox One X, offering variations in size and performance upgrades.
