In a recent earnings update, Microsoft has revealed that its gaming revenue from the Xbox division declined by 7 percent in its latest fiscal quarter that ended on December 31, 2024. Out of this, around 29 percent of the revenue drop has been attributed to Xbox hardware sales.
The Xbox division’s overall revenue reached $6.6 billion, a dip of $530 million compared to the previous year. Interestingly, the company reported a two percent rise in revenue from Xbox content and services, which likely includes video game sales and Game Pass subscriptions.
Most of the reported revenue from this quarter came from Microsoft’s cloud-related services, server products, advertising and search, each accounting for 21 percent of the revenue. Azure and related cloud services were the standouts in revenue, accounting for 31 percent.
The company noted in its report that, when looking forward, there are risks related to “impairment of goodwill” that could potentially hurt future revenue. The same was also noted in other potential issues, including supply or quality problems and issues surrounding the use of AI in Microsoft’s products.
This loss of revenue from Xbox’s hardware side falls in line with a report from earlier this month which indicated that console hardware sales in general were lower than before. In the report, Circana analyst Mat Piscatella compared December 2024 consoles sales to that from December 2023, noting a 38 percent decline for Xbox. In comparison, PS5 sales only fell by 18 percent.
Piscatella attributed this to the current-generation consoles being well past their sales heydays, which usually tends to happen earlier in a console generation. He also noted that, while being lower than the year before, hardware sales revenue in December 2024 was still higher than what it was in December 2019.
He also noted that, unlike PlayStation, Xbox Series X/S console sales lagged behind sales of the original Xbox One by around 13 percent.
