Technology news and discussion on TalkFuse.
Xbox revenue drops 10 percent as Microsoft’s cloud and AI business surges
Xbox recorded another weak quarter, with revenue from content and services such as Game Pass falling 10 percent and hardware sales dropping 13 percent, according to Microsoft's fourth-quarter earnings report. The decline comes as Microsoft's cloud and AI operations continue to expand rapidly, highlighting a growing divide between the struggling gaming division and the rest of the company's business. It follows a "reset" plan announced weeks earlier by Xbox head Asha Sharma, which included major layoffs and the spinoff of four games studios, among them Compulsion Games and Double Fine Productions.
Microsoft's overall revenue reached $90 billion, driven largely by its cloud business, which grew 27 percent to $59.3 billion, while its productivity division, covering Microsoft 365 and LinkedIn, rose 14 percent to $37.8 billion. Microsoft 365 Copilot surpassed 30 million paid seats and Azure revenue topped $100 billion for the first time. Xbox is also cutting Game Pass prices while testing free, ad-supported cloud gaming, even as console prices are set to rise by $100 or more from 1 August; Microsoft's Windows OEM and devices segment also fell 7 percent amid weaker PC demand.
In short
- Xbox content, services and hardware revenue both declined this quarter
- Microsoft's cloud and AI revenue grew strongly, offsetting Xbox weakness
- Xbox console prices rising in August despite ongoing "reset" and layoffs
Explained simply
Xbox is Microsoft's gaming division, producing console hardware, developing and publishing games, and operating Game Pass, a subscription service that gives players access to a library of games for a monthly fee. The division has been a major part of Microsoft's operations for more than two decades.
Microsoft is a sprawling multinational company with multiple business divisions operating in different sectors. Beyond gaming, it dominates productivity software used in offices globally and runs a major cloud computing business that provides computing power and services to other companies. The company has also made artificial intelligence a central focus within many of its products.
The performance of different divisions within a large corporation often signals where company leadership sees opportunity and faces challenges. Significant variations in growth between divisions typically prompt companies to reassess their investment decisions, resource allocation and strategic priorities.
AI Art Business Companies Culture Entertainment Gaming Technology