Xbox Hardware Revenue Declined 30% In 2023 Q3

Microsoft released its financial report for Q3 2023 and the results did not reflect well on the performance of Xbox Series consoles. Hardware revenue declined by 30% this quarter with a slightly lower 28% decrease in constant currency. Even though content and services grew by 3% this quarter, the overall Xbox gaming revenue saw a 4% reduction. Hence, the first three months of 2023 were not a big triumph for Xbox.

Amy Hood, the CFO of Microsoft, provided some insights into these financial results. She said that even though the overall revenue shrunk by 4% (1% in contrast currency), it was still “ahead of expectations.” Therefore, Xbox outpaced the company’s predictions this quarter. Hood also expanded on the decline in hardware revenue, saying that it was due to the increased console supply:

Xbox hardware revenue declined 30% and 28% in constant currency on a high prior year comparable that benefited from increased console supply.”

Xbox did have one big positive outcome this quarter with the growth in Content and Services. Game Pass was the main cause of the 3% increase in this sector in Q3 2023, with the subscription service bringing in almost $1 billion in revenue. Considering how Microsoft extended the service to 40 new countries, this 5% contrast currency increase isn’t a surprise.

The company’s CEO Satya Nadella also revealed how Xbox surpassed 500 million unique users this quarter. Hence, More than half a billion unique people have now played the company’s first-party games. In addition, Xbox also broke its personal record for the most monthly active users in the Q3 of any year when it comes to gaming.

The major force behind the increase in content and services revenue this quarter was the “better-than-expected monetization in third-party and first-party content and growth in Xbox Game Pass,” as per Amy Hood. She also mentioned how Microsoft expects gaming to grow in the 4th quarter and highlighted exclusive titles like Redfall. Hood mentioned an increase of “mid to high single digits” for the gaming sector in Q4.

We expect Xbox content services revenue growth in the low to mid-teens, driven by third-party and first-party content as well as Xbox Game Pass.”

Similar to Xbox hardware sales, Windows hardware and OEM also saw a 30% and 28% reduction respectively. Even with the low demand for hardware, the company’s revenue went up by 7% year-on-year. The revenue from cloud services and other offline products was a big reason behind this growth. Microsoft Cloud revenue was a whopping $28.5 billion and saw a 22% increase as compared to Q3 2022.

In totality, the American tech giant made $52.9 billion in Q3, a 7% increase from 2022. Hence, even if Xbox Series X and Xbox Series S did disappoint, this quarter wasn’t a failure for Microsoft.