Microsoft's Xbox division experienced a substantial downturn over the past fiscal year, reporting a revenue decrease of $1.7 billion, or 7 percent. This decline was attributed to drops in both Xbox content and services, and Xbox hardware sales.
In its fourth quarter, Xbox content and services saw a 10 percent decrease year-over-year, while Xbox hardware sales fell by 13 percent. This contrasts with the same period in the previous year, when content and services reported 13 percent quarterly growth. For the entire fiscal year, Xbox content and services revenue decreased by 5 percent, a period that had previously benefited from strong first-party content performance, though this was partially offset by growth in Xbox Game Pass. Xbox hardware revenue saw a more significant decline of 29 percent, driven by a lower volume of consoles sold.
These financial results come at a time of significant strategic shifts within Xbox, including mass layoffs impacting approximately 1,600 employees. New Xbox CEO Asha Sharma has indicated a refocusing of investment, moving away from smaller studios and niche titles to concentrate on major franchises such as The Elder Scrolls and Fallout.
The performance of Call of Duty: Black Ops 6 is also noted as a factor in the challenging year, following Microsoft's acquisition of Activision Blizzard for over $70 billion in 2023. The acquisition brought a vast multi-business-unit publishing operation under the Xbox umbrella.
Adding to the financial pressures, Xbox consoles have faced repeated price increases. The standard Xbox Series X now retails for $750, a 33 percent increase from its 2020 launch price. Microsoft is reportedly still incurring losses on each new Xbox console sold, even at the elevated prices, raising questions about the company's strategy for regaining console market share.