Microsoft has released its financial results for the three months ended March 31, 2023. The company’s fiscal year runs from July 1 through the end of June the following year. When compared to the same quarter last year, revenue for the quarter increased by 7% to $52.9 billion. Unfortunately for Xbox supporters, the gaming department did not rank among the company’s strongest divisions.
Microsoft stated that Xbox hardware sales in Q3 2023, exclusively driven by Xbox Series X/S, were down a startling 30% year over year.
That’s a rather surprising number given how well the PS5 is currently selling in comparison, with Sony breaking sales records seemingly every month. According to conventional wisdom, a rising tide lifts all boats, but it appears that the Xbox Series X/S is an exception. It appears that people are not interested in purchasing an Xbox Series X/S as a substitute now that they can more easily purchase a PS5.
Xbox content and services, which are primarily driven by Xbox Game Pass subscriptions, increased slightly (3 percent) in the games sector. That might sound good, and it kind of is, but Microsoft can’t be counting on such a small increase given how many eggs they’ve put in the Game Pass basket for growth.
GoldenEye 007 and the critically acclaimed exclusive Hi-Fi Rush were both released in the last quarter, but it seems that their impact on subscription revenue wasn’t very significant. Game Pass notably fell short of its subscriber goals in the fiscal year 2022, and it appears the service will do the same in the fiscal year 2023.
Activision Blizzard, the publisher of Call of Duty, is currently the subject of a bid by Microsoft to get the necessary approvals from regulatory bodies. They appear to be having trouble putting the pieces together right now, but if they can do that, their gaming fortunes will look very different.
The release of some significant Xbox-published games this quarter (Q4 2023)—including Redfall and Minecraft Legends—should improve Microsoft’s next earnings report for the gaming division. During Microsoft’s earnings call, CFO Amy Hood gave a positive Q4 outlook, forecasting “mid-to-high single-digit growth” in Xbox revenue year over year thanks to third and first-party releases and Game Pass. We’ll have to wait and see if that happens.
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