Xbox hardware revenue is in decline, but Microsoft says subscriptions and content define success

Microsoft has fired out its fiscal report for the full-year ended June 30, 2024, and the tech maker has reported another downturn in Xbox hardware revenue.

Xbox hardware revenue decreased by 42 percent year-over-year during Q4. As noted in a separate 10-K filing, that resulted in full-year Xbox hardware revenue tumbling by 13 percent year-over-year, "driven by lower volume of [Xbox] consoles sold."

That trend looks set to continue into the current fiscal year, with Microsoft CFO Amy Hood stating "hardware revenue will again decline year-over-year" during an earnings call.

Xbox content and services revenue provided some balance, increasing by 61 percent year-over-year in Q4–driven by 58 points of net impact from Microsoft's seismic Activision Blizzard acquisition.

Revenue in the More Personal Computing segment-which houses Microsoft's video game business–increased by 14 percent to $15.9 billion across Q4.

Breaking down its full-year performance, Microsoft said gaming revenue increased by $6 billion or 39 percent year-over-year during FY24. That upswing was "driven by growth in Xbox content and services."

"Xbox content and services revenue increased 50 percent [over FY24] driven by 44 points of net impact from the Activision Blizzard acquisition," added the company.

Microsoft says Xbox business isn't reliant on console sales

Discussing its broader plans for Xbox, Microsoft indicated that hardware sales aren't the holy grail and said it intends to continue finding "new opportunities to attract gamers across a variety of different end points through our first- and third-party content and business diversification across subscriptions, ads, and digital stores."

"We've seen new devices from third-party manufacturers along with key PC and mobile end points that help us empower gamers to play in a way that is most convenient to them. We are focused on growing the platform and expanding to new ecosystems to engage as many gamers as possible," it said.

The company explained Xbox revenue is mainly impacted by "subscriptions and sales of first-and third-party content, as well as advertising.

It added that growth is measured by tracking its "overall active user base through Xbox enabled content, availability of games, providing exclusive game content that gamers seek, the computational power and reliability of the devices used to access our content and services, and the ability to create new experiences."