Xbox earnings drop by $684 million during critical holiday period

Microsoft's Xbox gaming revenues fall by over $500 million during the holidays as consumers spend less on games and hardware and more on subscriptions.

Xbox earnings drop by $684 million during critical holiday period
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Senior Gaming Editor
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Xbox gaming revenues drops by over $500 million as recession economics disrupt the video games market.

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Gaming saw a big boom during the pandemic. The interactive entertainment industry hit record-breaking highs during COVID-19 lockdowns, but the market is now contracting under economic pressure. Consumers are spending less on games than they were a year ago and companies like Microsoft are feeling the changes.

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That's why Xbox gaming revenues were down by some $684 million during the critical Holiday 2022 period. Microsoft reported its Q2 FY23 revenues and outlined the earnings drop to investors. Total Xbox earnings were $4.76 billion from October - December 2022, down 13% and "driven by declines in Xbox content services and hardware."

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While earnings are down comparatively year-over-year, Q2 FY23 was the third best holiday period in Xbox history, following the record $5.44 billion generated in FY22 and $5.03 billion in FY21.

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Xbox earnings are separated into two sections: Content and services and hardware.

Microsoft made most of its money from content and services, which include games, microtransactions, subscriptions, etc. Xbox content and services made $3.392 billion in Q2'23, down 12%, with the declines being caused by the lack of comparable first-party game launches (Halo Infinite for instance released in Holiday 2021).

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Hardware made $1.38 billion, down 13% year-over-year due to the number of consoles sold. It appears Microsoft's steep Xbox Series S discount was not enough to match or beat last year's hardware sales.

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Of course there's no update on Xbox Game Pass subscribers. We know that Xbox monthly active users are at an all-time high of 120 million, which beats PlayStation's MAUs. Microsoft CEO Satya Nadella also said that Xbox Game Pass subscribers were at a new high but we didn't get any concrete data updates.

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So what does this mean for the Xbox brand? Not a whole lot.

The entire video games industry is expected to be hit with lower year-on-year earnings for holiday 2022. Microsoft won't be an exception here, however we will be sure to weigh Xbox revenues against Nintendo and PlayStation to get a better idea of how the Big Three are performing.