New details from Microsoft reveal that Xbox saw a 10 percent drop in revenue across content and services this last financial quarter, following a massive wave of layoffs and the offloading of development studios.
The financial report, which you can read in full on the Microsoft website, provides the aforementioned data under a wider four percent decrease to $12.9bn in the company’s personal computing business.
The same report offers little else in regard to Xbox, though insights focused on other areas of the company show far better performance elsewhere. For example, Cloud and AI are plastered on the title of the report, and are credited for fueling the $90bn quarterly revenue result.
“We are advancing the frontier on the cost-to-outcome curve, ensuring every customer can turn tokens into business results,” said Satya Nadella, chairman and chief executive officer of Microsoft. “This year, Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation.”
“We delivered a strong quarter to close out the fiscal year, highlighted by Microsoft Cloud revenue of $59.3 billion, up 27% year-over-year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.
It was earlier this month Microsoft announced 3,200 layoffs across its Xbox gaming division, with 1,600 of those job cuts being implemented immediately. This resulted in several major studios under its umbrella – including Bethesda and Id Software – to suffer significant staffing woes as a result of greater scrutiny being paid towards Microsoft’s gaming venture.
The company also jettisoned four studios (with Arkane Lyon potentially being a fifth). One of those studios – Double Fine – only yesterday announced layoffs. In a statement, the company said this was a decision made as a result of the studio’s new independent status. All of this part of Xbox’s wider “reset” to the business.
Meanwhile, the Xbox itself is becoming a hard sell for many. Xbox Series X/S price hikes have been made during harsh economic times, making it less affordable for potential customers. While this has also impacted its competitor in Sony and the PlayStation 5, it’s been made necessary by the generative AI boom and subsequent hardware component shortages that Microsoft as a wider company has benefited from.
Also, it’s worth noting that Microsoft and Xbox remain present on the BDS boycott. The company has remained as such due to its involvement in the continued bombardment and mistreatment of people in Gaza. The BDS boycott has called explicitly for people to cancel their Xbox subscriptions and Xbox-owned games.
Whether Xbox can turn around this drop in performance with upcoming releases like Gears of War E-Day or larger strategy shifts remains to be seen. But it’s a deep financial blow to an already struggling gaming company, marching headfirst into a near-future that’s unlikely to get any kinder on the economic front.
