Microsoft held its second quarter earnings call today, with the company reporting that, despite gaming revenue increasing 9% year-over-year, Xbox hardware sales were down.
The increase in revenue was instead driven byMicrosoft’s acquisition of Activision Blizzard and Xbox Game Pass subscription numbers. Xbox hardware revenue decreased by 25% due to the company selling fewer consoles.
The company didn’t say all that much about gaming overall, which was interesting. Microsoft is, however, investing heavily in both AI and Cloud services, with revenue in the latter category increasing 23% YoY to $168.9 billion.
“This quarter, the Microsoft Cloud surpassed $50 billion in revenue for the first time, up 26% year over year, reflecting the strength of our platform and accelerating demand,” Microsoft CEO Satya Nadella said on the earnings call.
Microsoft has essentially cornered the Cloud gaming market thanks to Game Pass, whichincreased its prices last year. It seems healthy subscription numbers, despite the push-back many consumers felt at the time, has been offsetting the company’s hardware losses.
Xbox Game Pass Is Still a Strong Value, but Its Long-Term Costs Are Adding Up
Xbox Game Pass has historically been an incredible value for players seeking a rotating gaming library, but it has recently struggled to find balance.
“In gaming, we are committed to delivering great games across Xbox, PC cloud and every other device, and we saw record PC players and paid streaming hours on Xbox,” Microsoft CFO Amy Hood said on the call.
Microsoft could be uniquely positioned in a time wheregaming hardware could be facing issues due to RAM scarcity. Thanks to its partnership with OpenAI and significant investments into Cloud infrastructure, it could be that Xbox is in a better position than many think.
