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Xbox Hardware Sales Down a Third Year-on-Year, Xbox Game Pass Sees Only Minor Growth

Microsoft Xbox Series X and S Next-Gen

Microsoft has released their earnings for the quarter ending March 31, 2023 (their fiscal year runs from July 1 until the end of June the next year) and, overall, it was a good quarter for the company. Revenue for the quarter was $52.9 billion, up 7 percent compared to the same quarter last year. Unfortunately for Xbox boosters, the gaming division was not one of the standout parts of the company. In fact, some of the figures posted were downright concerning.

In Q3 2023, Xbox hardware revenue (almost entirely derived from Xbox Series X/S at this point) was down a whopping 30 percent year-on-year. That’s a rather startling figure considering sales of the rival PS5 are on fire right now, with Sony setting new sales records seemingly every month. The conventional wisdom is that a high tide lifts all boats, but apparently that’s not the case with the Xbox Series X/S. Now that folks can more easily buy a PS5 it seems they’re not interested in picking up an Xbox Series X/S as an alternative.

Meanwhile, on the games front, Xbox content and services was up slightly (3 percent) mostly driven by Xbox Game Pass subscriptions. That may sound like a positive, and it is to a degree, but such a slim increase can’t be the kind of growth Microsoft is looking for from Game Pass considering how many eggs they’ve put in this basket. This past quarter saw the release of GoldenEye 007 and the shadow-launch of the acclaimed exclusive Hi-Fi Rush, but apparently, those games’ effect on subscription revenue wasn’t huge. We already know Game Pass badly missed subscriber targets in fiscal year 2022, and it seems the service may be on track to do the same in FY2023.

Microsoft is currently trying to get their proposed acquisition of Call of Duty publisher Activision Blizzard past regulators. If they can achieve that, their gaming fortunes will look quite different, but for now they seem to be struggling to put the pieces together. This current quarter will see the release of some major Xbox titles, including Minecraft Legends and Redfall, so hopefully, Microsoft’s next earnings report will be a better one for the gaming division.

What are your thoughts on the latest results from Xbox? Is there anything Microsoft can do to spur Xbox Series X/S sales? Is Game Pass going to continue to grow or remain more-or-less stalled out where it is?

Written by Nathan Birch
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