Microsoft reports a decline in gaming revenue, but Xbox Series X|S continue to break records

The Xbox Series X|S are still the fastest selling Xbox consoles in Microsoft's history

(Credit: Microsoft)

➡️ The Shortcut Skinny

• 📉 Microsoft’s Q4 financial results fell below expectations

• 🔻 Gaming revenue fell 7%, hardware sales fell 11%, and Xbox content and services fell by 6% but was offset by growth in Game Pass subscriptions

• 😲 Xbox still made a $16b revenue for the entire year, a new record

• 🏆 Microsoft has sold more Xbox Series X and S consoles life to date than any previous generation of Xbox

• 🆚 Xbox Series X|S outsold PS5 in North America for 3 straight quarters, likely because of the dearth of PS5 restock opportunities

• 🔮 Microsoft expects Xbox sales to decline in FY 2023 due to a lack of first-party content

• 📈 But overall, console revenue and Xbox Game Pass subscriptions are expected to grow

Microsoft has shared its Q4 financial results (April through June), and it’s been another strong showing for its Xbox division.

Even though Microsoft’s financial results fell below expectations, the company still made a net income of $16.7 billion. In terms of Xbox, gaming revenue, hardware and sales, and Xbox content and services all fell in Q4. It’s still the second best 4th quarter in the brand’s history, though. You can see Microsoft’s full earnings release FY22 Q4 here.

Microsoft’s CEO Satya Nadella shared that despite the drop in sales, Xbox Series X|S consoles have sold more than any previous generation of Xbox life to date, making the X and S the fastest-selling Xbox consoles ever.

Nadella also said that the Xbox Series X|S outsold the PS5 for three straight quarters and that “Over four million people have streamed [Fortnite] to date, including 1 million who were new to our ecosystem.” Microsoft has previously announced that 10 million people have used Xbox Cloud Gaming.

• 🆚 PS5 vs Xbox Series X: is there really a winner?

In a call with The Verge, director of Microsoft investor relations Kendra Goodenough shed some light on why Xbox hardware sales have declined:

“The decline you’re seeing in Xbox hardware is partly a reflection of the fact we had that launch... about two years ago, so with the supply constraints that we had seen over the last couple of years it has kind of extended out that period for consoles. We’re still seeing strong demand, but coming off those highs that we saw in the last couple of years with the launch.”

Xbox has had its best ever fiscal year, making around $16.2 billion in revenue. However, Microsoft has said that gaming revenue and Xbox content and services will decline again next quarter.

Microsoft didn’t provide a new update on total Xbox Game Pass subscribers, which surpassed 25 million in January. It did note that the 6% drop in Xbox content and services was offset by a growth in Game Pass subscriptions.

👍 Xbox consoles continue to improve

(Credit: Microsoft)

Microsoft may have come under fire for the lack of first-party titles released this year, but its strategy of offering two consoles — a high-end and more affordable model — appears to be paying off.

Xbox Game Pass is obviously the vehicle driving Microsoft’s success, however, and brings in revenue from PC and mobile gamers as well as console owners. Microsoft continues to offer day one releases of its first-party games on Game Pass, as well as indies and third-party titles. Check out our Xbox Series X games 2022 list to see what’s on the way.

• 👀 Don’t have Xbox? Check the Xbox Series X price and Xbox Game Pass Ultimate 12-month discount code

Xbox console owners have also benefitted from several system updates, improving the functionality of the Xbox Series X and S. Discord voice chat is the next big feature on the way, but Microsoft is also fixing this frustrating Xbox Series X problem, and a new update speeds up the console significantly.