Hardware revenue declined by 13 percent year-on-year.
Microsoft's video game business is enduring a sticky spell with revenue declining across the board.
According to the company's fiscal report for the second quarter—ended December 31, 2022—Xbox hardware revenue declined by 13 percent year-on-year, while Xbox content and services revenue declined by 12 percent.
In an earnings call, Microsoft CEO Satya Nadella said that decline was partly due to the "strong first party content" the company put out last year.
Across the entire More Personal Computing business, which includes Xbox content and services, revenue decreased by 19 percent year-on-year to $14.2 billion.
Although hardware and content revenue stumbled, Microsoft said it saw "new highs for Game Pass subscriptions, game streaming hours and monthly active devices." It added that monthly active users surpassed a record 120 million during the quarter, suggesting engagement within the Xbox ecosystem remains strong.
Looking ahead, Microsoft said there's plenty to be optimistic about thanks to its upcoming roster of triple-A releases, which includes new titles from ZeniMax and Xbox Game Studios.
It does, however, still expect video game revenue to continue declining throughout the third quarter of the current fiscal year.
"We expect revenue to decline in the high-single digits. We expect Xbox content and services revenue to decline in the low-single digits as growth in Xbox Game Pass subscriptions will be more than offset by lower monetization per hour in third-party and first-party content," said the studio, laying out its Q3 outlook for its Gaming segment.
Microsoft's latest fiscal report has landed a week after the company confirmed it will be laying off 10,000 employees from its overall workforce. It's being reported that multiple game studios, including Bethesda and 343 Industries, will be affected by the job cuts.
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