Microsoft is poised to make more money from Xbox than it ever has before, and FY2021 is already a record year for its gaming segment.
The current market is perfect for the video game business, especially Xbox. Microsoft's diversified cross-platform webwork of services, hardware, monetization, and game sales is being supercharged by COVID-19 lockdowns, which have pushed more consumers indoors with controllers in hand.
Thanks to this landscape, Xbox is breaking new ground. In Q2'21, which coincides with the 2020 holiday period, Xbox earned an astronomical $5.027 billion in combined revenues. This is the first time the Xbox division made more than $5 billion in a single quarter.
Why Xbox revenue was so high in Q2 FY2021:
- Game Pass subscribers jumped by 5 million in 3 months, total subscribers now sit at 18 million.
- Hardware sales are up 86%. Xbox Series X/S had the best console launch in Xbox history. No hardware numbers were given, but the consoles remain sold out.
- Purchases of games on Microsoft Store are up thanks to COVID-19 lockdowns, releases of big games like Black Ops Cold War.
- Strong monetization in services like Xbox LIVE, Game Pass, and microtransactions in free-to-play games.
Xbox gaming revenue was up an astronomical 51%, or $1.7 billion in the quarter, Microsoft said. Revenues haven't been this high since Q2'19, where gaming earned $4.232 billion thanks in no small part to Call of Duty Modern Warfare's breakout success.
This strong trajectory sends a clear message: Xbox revenues will hit a historical all-time high in FY2021.
We've put together a quick graph that says it all. In just two quarters, Xbox has made nearly as much as FY2017's total-year earnings. Q1+Q2's revenues combined also account for 70% of FY2020's total-year earnings, and Q2'21 is almost as high as Q2'20 and Q3'20 combined.
The entire games industry is riding earnings surges thanks to COVID-19, leading to dramatic record-breaking revenues and gains across multiple segments (hardware, services, software, etc.).
Microsoft is in a unique position to capitalize on every aspect of these trends thanks to its service-first business model, especially as it fills out more content value for Game Pass.