FY23 Q1 Xbox games revenue up 4% driven by hardware, offset by lower content engagement

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What do you want to know

  • Microsoft has released its earnings report for the first quarter of fiscal 2023, which ended September 30, 2022.
  • The earnings report reveals that the Xbox division recorded a 4% increase in revenue compared to the same period last year.
  • This increase is explained by a 13% increase in revenue from hardware sales, such as consoles.
  • The gains were offset by a 3% decline in content and services revenue, in part due to a lack of first-party content.

Microsoft has detailed its earnings report for the first quarter of fiscal 2023, the start of a new fiscal year that ended September 30, 2022. The earnings report shows an increase in revenue for Microsoft as a whole , with Xbox also seeing a slight increase from numbers reported during the same period last year.

According to Microsoft (opens in a new tab), the Xbox division reported a 4% increase in overall revenue to $3.61 billion. This was primarily due to a solid 13% increase in Xbox hardware revenue, such as sales of Xbox series X and S consoles, accessories, and more.

This increase returns Xbox to the upward trends of previous quarters, after FY22 Q4 saw a slight decline of overall revenue from Microsoft’s games division. Xbox hardware sales appear to be doing well, with supply better able to keep up with demand compared to the previous quarter. However, Xbox also reported a 3% drop in revenue from content and services.

Xbox says this decline is due to a decrease in first-party and third-party content, referring to the lack of high-profile Xbox Game Studios launches outside of titles like Based and the next Pentiment. While there are still many excellent Xbox titles to play, many of the most anticipated first-party and third-party Xbox games won’t be released until 2023 and beyond.

Xbox reported that lower content and services revenue was partially offset by continued growth in Xbox Game Pass subscriptions, although specific numbers are not mentioned. PC Game Pass appears to be growing at a significant rate, with Microsoft CEO Satya Nadella reporting a 159% year-over-year increase for PC-centric game subscription.

The next 12 months could see major gains in these areas, as Xbox has a slate of first-party games coming throughout 2023, such as Minecraft LegendsForza Motorsport (2023), star field, and Redfall. The ongoing acquisition of Activision Blizzard would also see Microsoft gain a large number of games and IPs for the Xbox division and Xbox Game Pass, and is expected to close before June 30, 2023.

Beyond the game Microsoft reported global revenue of $50.1 billion, slightly exceeding expectations. Microsoft’s revenue was driven by steady increases in commercial Windows products such as Microsoft 365, and search and advertising revenue through Bing. On the other hand, Windows OEM revenue fell 15%, indicating a significant drop in demand for third-party Windows laptops and devices.

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