How's Xbox Doing? Here Are The Key Takeaways From New Earnings Report
Microsoft reports that Xbox Live users grew, while hardware sales dropped.
Microsoft reported earnings for its latest period today, and the company's gaming numbers were up and down. For the quarter ended June 30, total gaming revenue for Microsoft was $2.053 billion, which is down 10 percent from $2.286 billion this quarter last year.
Hardware revenue specifically was down 48 percent due to a decrease in the number of consoles sold. A downturn in console sales is to be expected, given the Xbox One has been on sale since 2013. It's also a historical pattern that console sales drop before the release of new hardware, and that seems to be the case here with Project Scarlett slated for release in Holiday 2020.
Another thing to consider is that the money in gaming is made with software and services, not console hardware. It's not just Microsoft that's experiencing a downturn in hardware sales. The NPD Group reported today that total hardware spending in the United States fell 33 percent year-over-year. PS4 sales are falling as well; only the Nintendo Switch posted year-over-year growth.
Microsoft's gaming revenue from software and services for the period was down a more modest 3 percent. Microsoft said this downturn was due in part to the same quarter last year being exceptionally strong due to a "third-party title," which is likely a reference to Fortnite. Also, Microsoft said its subscription revenue grew in the latest quarter, which is a positive.
Microsoft has recently expanded its subscription revenue category through Xbox Game Pass and Xbox Game Pass Ultimate. The new streaming service, xCloud, could be yet another channel of subscription revenue for Microsoft when the platform rolls out later this year.
Another positive for Microsoft is that Xbox Live users grew to 65 million for the quarter, which is up 14 percent compared to the 57 million members that Microsoft reported a year ago.
Microsoft is one of the biggest companies on planet Earth, and gaming is just one part of its businesses. Altogether, Microsoft posted revenue of $33.7 billion for the quarter, which was up 12 percent. Additionally, Microsoft made $13.2 billion in profit for the three-month period.
Looking ahead, Sony, Nintendo, and EA will all announce their own earnings on July 30, while Take-Two and Activision will follow in August.
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