Xbox sales down 7% in Q422: it could have been worse | Xbox One

Microsoft has just presented its latest financial results, those for the fourth fiscal quarter of 2022. The group is growing overall, but certain activities are rather losing ground, starting with gaming with Xbox.

Microsoft explains its performance

Overall, Microsoft ended the year on a mixed note since even if the turnover reached 51.9 billion, up 12%, the net profit was only barely positive at +2% with 16, $7 billion.

Amy Hood, executive vice president and chief financial officer of Microsoft pointed to an increase in demand and market share.

“In a dynamic environment, we saw strong demand, gained market share and increased customer engagement with our cloud platform. Commercial reservations increased 25% and Microsoft Cloud revenue reached $25 billion, up 28% year-over-year

As we enter a new fiscal year, we remain committed to balancing operational discipline with continued investment in key strategic areas to drive future growth.”

Microsoft believes that several factors have come to put a spoke in the wheels of its business, starting with the unfavorable fluctuations in exchange rates. Extended production shutdowns in China impacted PC and Windows market revenue by $300 million, while ad spend cuts impacted LinkedIn and Bing. Microsoft also reduced its operations in Russia following the war in Ukraine with an estimated impact of $126 million and laid off employees with severance packages of $113 million.

Next to that, Microsoft recorded good general performance with an increase in Windows turnover (+1%), advertising (+15%), Surface (+10%) or even the Cloud at +25%, which represents nearly half of Microsoft’s global turnover!

Xbox and gaming revenue down too

The quarter did not particularly shine on the side of Microsoft’s video game division. Without a major exclusive release for more than six months and despite the appeal of the Xbox Game Pass, the brand is running out of steam. Thus, gaming revenue is down 7% (259 million), in particular due to content and services as well as hardware.

Revenue generated by Xbox content and services was down 6%. Microsoft explains this by lower player engagement and lower monetization, both for games developed internally and those developed by its partners. Hardware revenues are down 11%, but it is difficult to assess the figure as the shortage of Xbox Series X continues, even if there is an improvement in the availability of consoles.

The only element in progress in the video game: the number of subscribers to Xbox Game Pass. Microsoft is careful not to communicate the figures, but the service had 25 million subscribers in January. It should be around 28 million today according to our estimates.

These results are not really a surprise since Xbox has remained very wise in recent months. None of its studios have released a new game since last year and that won’t happen until November. With the postponement of Starfield and Redfall to next year, it would seem, except surprise, that Pentiment is also the only release from Xbox studios this year.

Given the calm observed on the Xbox side in recent months and the context, one could however have imagined a more significant drop in income. This last fiscal quarter of 2022 still remains the second in terms of gaming revenue records for Microsoft, the highest over the period being held by that of last year. Also remains the deal with Activision Blizzard which continues to hover and which should be concluded by next summer. 2023 is going to be a crazy year for Xbox.

Xbox revenue in recent years (John Welfare)