Big 3 console hardware revenues compared: Xbox made just 13% of annual earnings from hardware

Microsoft's latest gaming results underline its core focus as a service-first company as hardware sales drop over time. These results yield interesting comparisons against PlayStation and Nintendo.

6

Hardware has always been a weak spot for Microsoft, at least where gaming is concerned. It's not that the tech giant hasn't seen success with video games hardware--it has, especially during the Xbox 360 days, and Xbox Series is currently doing well in the United States. But there's been one problem that has plagued Xbox hardware from the get-go: The consoles have never been produced at a profit.

Unlike Sony and Nintendo, who both sell their respective hardware at a profit (an eventuality for Sony, but the Switch was sold at a profit on day one), Microsoft makes its gaming profits solely from Content & Services. This includes game sales (both first- and third-party), monetization, and subscriptions. Xbox has slowly become a digital-first enterprise over the years as a result.

It should be no surprise then that Xbox makes most of its earnings from software and services, especially after it purchased arguably the biggest service-driven video games company on the planet in 2023--Activision Blizzard King.

6

This is reflected in Microsoft's latest FY24 results for the Xbox brand.

According to the results, Xbox hardware made up just 13% of total annual revenues for the Fiscal Year 2024 period, or about $2.872 billion. Content & Services made the lion's share with 87% of revenues, or $18.653 billion.

This is to be expected given Microsoft's emphasis on content sales, software, and subscription services like Xbox Game Pass--especially with the addition of Activision Blizzard King, who is now a major billion-dollar contributor to the Xbox brand.

To get a better idea of how this compares to PlayStation and Nintendo, we took converted hardware and software earnings from both companies and aligned them to Microsoft's fiscal year timeline which runs from July - June.

The results were pretty interesting:

6

Big 3 Hardware Sales Revenue

• PlayStation - $7.911 billion (27% of total)
• Xbox - $2.872 billion (13% of total)
• Nintendo - $4.175 billion (44% of total)

6

6

So what does this tell us? The data really underlines the core strengths and major focuses of each company. Nintendo and Sony/PlayStation operate on a more traditional long-term business where profitable hardware is emphasized alongside software, services, and of course accessories.

Microsoft, on the other hand, is more focused on high-margin businesses like software and services. Note that these are higher margin for Microsoft because it produces all Xbox hardware at a loss--Sony and Nintendo have continually refined their manufacturing processes to deliver profitable console sales, especially Sony, who has gone through multiple PS5 revisions in an effort to reduce shipping costs and optimize production.