Microsoft has been in the gaming industry now as a platform holder for nearly two decades, and while there’s definitely been some rough years, it seems the company right now is in a good place in the gaming world. The company has released their earnings for their first quarter of the fiscal year 2021, and things are up in a big way.
In the conference call, Microsoft CEO Satya Nadella and CFO Amy Hood broke down where the Xbox division was. Overall, gaming revenue grew by 51% this quarter. Xbox hardware revenue jumped up an incredible 86%, in large part contributed to the launch of the Xbox Series X/S last November, which they have stated in the past was their biggest console launch ever. Hood noted they expected “growth in the high 20% range” as demand continues for the new consoles even with expected supply constraints.
Xbox content and services also grew 40% in the quarter, with credit giving to the continued expansion of Xbox Game Pass, as well as increased third party sales in the ecosystem. Overall, it was predicted that growth will continue for both hardware and services, though it was stated there could be a negative gross margin as they continue to invest and they are not currently factoring the acquisition of Bethesda into their estimates, as detailed by Hood below:
“In gaming, we expect revenue growth in the high 20% range. We expect very strong demand following the launch of our next-generation Xbox Series X and S consoles driving supply-constrained hardware revenue growth of approximately 40%.
“We also expect a negative gross margin impact from console sales this quarter, as we invest against the growing lifetime value of the platform. Xbox content and services revenue should grow in the low 20% range with strong engagement and continued momentum in Game Pass subscribers.
“As a reminder, our outlook does not include Zenimax, which we still expect to close in the second half of the fiscal year.”
To hear the entire conference call as well as see the full transcript, you can head on over here.