After several years of proud gaming revenue growth, Microsoft’s gaming segment finally looks like it’s slowing down a bit thanks to Xbox Series X and S sales. A dip is to be expected, but the lack of major first-party game releases doesn’t necessarily make things any better.
The company announced its second quarter earnings today. Xbox posted its first year-over-year decline in a long time. Gaming revenue fell 13% year-over-year, with hardware revenue in particular dropping in the same way. Overall, Xbox content and services revenue fell by 12%. Microsoft attributes this decline to several factors, including lower spending on first-party content, lower monetization of third-party content, and a strong year-over-year period.
What this essentially means is that Xbox didn’t have a strong first-party lineup to spend this past holiday, but 2021 has always been a year that’s hard to beat. We have Halo Infinite, and in hardware the Series X and Series S are in high demand, and supply has increased as supply chain restrictions have started to ease.
So while the Xbox slump is a shift from recent patterns, it’s predictable and relatively minor, with Microsoft’s gaming division at roughly the same revenue levels seen in 2020-2021. And according to Xbox, Game Pass subscriptions continue to grow.
What’s even more troubling is what happened after that. Just last week, Microsoft laid off 10,000 of his employees, including those at The Coalition, 343 Industries and Bethesda. Billed ostensibly as a cost-cutting measure in light of slowing consumer spending and the ongoing recession, it remains to be seen how these cuts will affect future game productions within Xbox. It remains unclear which teams and games were affected.
Microsoft’s Xbox and Gaming segment is part of its More Personal Computing division, which posted revenue of $14.2 billion, down 19% due to declines in multiple segments, including Games. Overall, Microsoft made his $52.7 billion in revenue, up 2% year-over-year.
We’ll hear Microsoft’s earnings call later today and will update this story with more insight.
UPDATE: January 24, 2023 at 3:12 PM PT: CEO Satya Nadella added on the earnings call that Xbox had over 120 million monthly active users during the quarter.
Microsoft expects further year-over-year declines in the next quarter. This is due to a similar situation with a strong previous year and fewer releases. Gaming revenue declined in the high single digits, while Xbox content and services declined in the low single digits. Xbox Game Pass subscriptions are expected to continue to grow.
Rebekah Valentine is a news reporter for IGN. you can find her on her twitter @duck valentine.
