Following Microsoft’s recent earnings report, in which the company revealed that Xbox revenue had fallen by 10 percent in the previous quarter year-on-year, CEO Satya Nadella has offered more statements on the company’s decisions going forward. When it comes to devices and other consumer-facing businesses like Xbox, Nadella said that the company is continuing to make “necessary decisions” that will help it “reset the business for long-term growth.”
“When it comes to Xbox, we are making the necessary decisions required across our content portfolio, platform, and operations to reset the business for long-term growth,” he said to an analyst, according to GamesBeat. “We have the best IP in the industry and talented studios around the world, and believe we can bring these trends together and expect to return the business to growth in fiscal 2027.”
As for plans regarding the growth of Xbox’s user base, Microsoft said in its 10K filing that it is working on making sure that its businesses are diversified across subscriptions, ads, and digital stores to attract gamers through different means. This also means stronger partnerships with first- and third-party content makers.
“We are identifying new opportunities to attract gamers across a variety of different endpoints through our first- and third-party content and business diversification across subscriptions, ads, and digital stores. We’ve seen new devices from third-party manufacturers along with key PC and mobile endpoints that help us empower gamers to play in a way that is most convenient to them. We are focused on growing the platform and expanding to new ecosystems to engage as many gamers as possible.”
In further statements, Nadella also mentioned that Xbox’s revenue has been on a steady decline, with 11 percent dips in the quarter preceding the most recent one. Gross margin dollars made from the division had also seen a 2 percent decrease. However, amortization from the Activision Blizzard acquisition has increased the gross margin percentage for the division year-on-year. The company is continuing to spend money on R&D efforts, with growth in expenses going up by 8 percent and 7 percent in concurrent quarters.
Despite the fall in revenue from Xbox, Microsoft as a whole is celebrating an overall 18 percent increase in revenue over the course of the quarter, amounting to around $90 billion. Nadella praised the Azure division for also having hit a major milestone by passing the $100 billion revenue mark.
“We are advancing the frontier on the cost-to-outcome curve, ensuring every customer can turn tokens into business results. This year, Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation.”
Earlier this month, Xbox underwent sweeping layoffs across the division, amounting to around 1,600 job cuts. Division CEO Asha Sharma also confirmed that 1,600 more cuts are planned over the course of the fiscal year. As part of the move, the company is also divesting itself of four of its studios – Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs.
