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How's Xbox Doing? Key Takeaways From Latest Earnings Report

Hardware sales might be down, but Starfield, cloud services, and other software divisions drove huge growth for Microsoft.


Business is booming at Microsoft, as the company has just posted the first quarter (July to September 2023) of its 2024 fiscal financial results. While there have been a few misses, overall, revenue is up 13% and net income has seen a 27% increase thanks in part to Microsoft's cloud services, OEM revenue, and the Xbox division that recorded its highest-ever Q1 and biggest non-holiday quarter overall.

On the gaming side, Xbox hardware revenue declined 7% even with the launch of a new Xbox Series S console that increased the available storage capacity on that device from 512GB to 1TB. The good news here is that Xbox content and services revenue rose by 13% and overall gaming revenue is also up 9%. While Game Pass numbers still aren't being shared by Microsoft, it looks like the subscription service is still on the rise.

The last big update from Microsoft about Game Pass was back in January 2022 when the company announced that it had grown to 25 million subscribers, and with 2023 seeing the launch of games like Starfield, those numbers have contributed to the Game Pass gains.

"On launch, we set a record for the most Game Pass subscriptions added on a single day ever," Microsoft CEO Satya Nadella said (via The Verge) about Starfield's arrival on that platform. More than 11 million people have played the game so far, and the PC version accounts for around half the hours spent in Bethesda's sci-fi adventure.

With the acquisition of Activision Blizzard now finalized, Microsoft can also focus on growing the PC Game Pass subscription base as back in October Microsoft Gaming CEO Phil Spencer admitted that the console subscriptions have begun to slow down.

Overall, Microsoft made $56.5 billion in revenue and recorded a net income of $22.3 billion during Q1. Other highlights--and a few lowlights--from the financial results include:

  • Windows OEM revenue increased by 4%
  • Overall device revenue decreased by 22% in Q1
  • Microsoft Office commercial products and cloud services revenue grew by 15%
  • Microsoft 365 Consumer subscriptions have increased by 18% year-over-year, partly thanks to a new $2 per month basic subscription service
  • Microsoft Teams now has more than 320 million monthly active users
  • Cloud business revenue generated $24.3 billion in revenue this quarter, a 19% increase
  • Revenue from Azure and other cloud services grew by 29%

The next couple of months will be interesting for Microsoft in the wake of its Activision Blizzard acquisition. Gaming revenue is expected to increase dramatically according to CFO Amy Hood, now that Microsoft owns the Call of Duty franchise and the lucrative mobile games developed by King as part of this deal that took almost two years to be completed.

Microsoft expects to see a mid to high 40% growth in overall gaming revenue and a mid to high 50% increase in Xbox content and services in the second quarter of the 2024 financial year.

Darryn Bonthuys on Google+

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