Microsoft’s Gaming Revenue Suffers From $259m Decline, Report Reveals

On July 26th, 2022, Microsoft published a transparent financial report revealing all aspects of the firm’s performance through Q4 of 2022. It was a telling report, explaining how, overall, Microsoft secured a total revenue of $51.9 billion, showing a 12% increase year on year. This included an operating income total of approximately $20.5 billion (an 8% increase) and a total net income of around $16.7 billion. However, the report also revealed that Microsoft’s gaming revenue had suffered from a $259 million decline.

As technology evolves, so too do the ways in which companies in the tech sector operate. With that in mind, it seems relatively obvious that Microsoft’s Cloud revenue was the standout example from the entire report, boasting a 28% growth year over year. Despite this remarkable growth, Microsoft did confirm it had struggled in certain areas, which of course included a 7% downfall in gaming revenue that was focused mostly on the Xbox product.

Microsoft The Money Maker

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In the access-all-areas financial report, Microsoft confirmed that a considerable blow had been absorbed following the events of the ongoing war in Ukraine. As Microsoft scaled down its operations in Russia, there had been substantial losses caused by bad debt expenses, severance, and asset impairments. Furthermore, Microsoft’s hardware income was impacted by ‘extended production shutdowns’ in China, as well as a global shortage of chips for consoles and computer hardware.

Even taking these losses into consideration, Microsoft still experienced a stellar quarter. There was an increase in commercial bookings of just over 25%, a huge increase in Cloud computing revenue, and a small boost in revenue obtained from the personal computing sector worth some 2%. As part of the report, the CEO of Microsoft, Satya Nadella, said:

We see a real opportunity to help every customer in every industry use digital technology to overcome today’s challenges and emerge stronger. No company is better positioned that Microsoft to help organisations deliver on their digitial imperative – so they can do more with less … As we begin a new fiscal year, we remain committed to balancing operational discipline with continued investments in key strategic areas to drive future growth.

The Xbox Problem

One of the biggest decreases in performance was seen in Microsoft’s gaming revenue, with the company revealing a $259 million decrease year over year. It was a 7% decline that seems like nothing compared to the 32% decline in Office Commercial products revenue, but it was a considerable hit nonetheless.

There were several reasons put forward by Microsoft to explain this growth, including the claim that Xbox content revenue had decreased as a result of lower engagement hours across the board. There were some declines noticed in terms of hardware performance, caused primarily by a shortage of chips and better performance by competitors. Ultimately, the decreased performance was offset slightly by considerable growth in Xbox Game Pass subscriptions, but it wasn’t enough to fully make up for the shortfall.

In the year ahead, Xbox has a busy schedule that includes the launch of several first-party titles, and the impending closure of the deal to acquire Activision.