Microsoft Gaming Revenue Grows 5% Year-on-Year, Content and Services Up 8%, Xbox Hardware Down 6%

Microsoft announced its financial results for Q3 of fiscal year 2025, including an update on its gaming business.

[darthv72]

To put it simply... two steps forward, one step back.

[Abriael]

That's not how that works.

Gaming revenue is already a balance of Content and Services +/- Hardware. So it's simply one step forward. Microsoft's gaming business is growing, and has been growing pretty much forever.

[darthv72]

...two steps forward and one step back still amounts to one step forward, does it not?

[Abriael]

@darthv72: But in this case, it's more one step forward that would be pretty large, but is held back by some weight, so it's instead a bit smaller, but it's still a sizable step forward, since hardware weighs a lot less than content and services. Your comparison would work if C&S and Hardware were equivalent.

[anast]

Revenue is not profit. So, we don't know if they have actually been growing or playing catch up.

Darth is correct by the way.

[rlow1]

I imagine we would have to know the profit they make off of each category. To be able to access how much of an impact the negative console sales have on the whole. If they barely squeak a profit out of hardware or better yet, are in the negative for each sold. It won’t impact the other categories as much. Considering the bulk of the profits come from software. But just my take.

[tay8701]

Care to reassess your statement? Xbox is officially dead in the water now, console wise. No one was buying it before and they damn well wont be doing so going forward. They just raised the cost on their controllers, consoles, and pushed the price to $80 on games. Gamepass will be soon be seeing another price hike as well, book it.

[Christopher]

Really depends on your goal. I was told by Microsoft that they were still pushing hardware, so I don't know what to believe.

[StormSnooper]

One step forward toward becoming a 3rd party publisher. But yes one step forward.

[TheColbertinator]

Another win for Microsoft. The haters can use the dog door to leave.

[Christopher]

*gets stuck in the cat door*

[DodoDojo]

And then Chris said: "Help me step brother"

[Johnh5223]

They should drop the price of hardware permanently . Its been 5 years but have had price increases? Doesn't make since

[MrNinosan]

And with that comment, you explain why you don't run a business or have any understanding of a business 👍

[dveio]

Hardware revenue will probably sit somewhere between 800M - 1B for the quarter.

And content & services make up around 75 - 80% of total gaming revenue. Total gaming revenue is up 5%.

While positive numbers are positive, I don't find +5% year-on-year in total revenue a great, not even a good result considering what they've been throwing into the pot since their last Q3.

I don't think they are happy with only a +5% payoff since and compared to last year's Q3, which was abysmal, despite these numbers are indicating "Positive!" at 1st glance.

Especially since in terms of revenue, hardware doesn't contribute a lot to overall revenue anymore ("only" -6% down, because there's no hardware really being sold anymore).

[dveio]

Edit:

"Hardware revenue will probably sit somewhere between 800M - 1B for the quarter."

Was too optimistic.

It's estimated to be at ~330M in Q3.

This means hardware revenue contributed ~6% to Xbox total gaming revenue.

Which then means that 94% of Xbox total gaming revenue in their Q3 '25 was driven by content & service.

And that big portion is up 8% compared to last year's Q3, dragged down by -6% hardware revenue, totalling +5% overall.

Is that really a good result for an up to now 94% "content & services segment", considering that, after last year's Q3, there were Call of Duty, Indiana Jones, Stalker 2, Flight Simulator & other 3rd parties being put D1 into GP?

And considering that subscriptions themselves also fall into content & services segment?

+5% is growth no matter what, sure. No denying.

But ... looking at what they've been throwing into their "content & services" playground since Q3 '24, I don't really see how +5%, while being growth, is a good result business-wise (ROI).

[crazyCoconuts]

I'm thinking the same thing. This year is kinda like a sugar high for MS. Lots of great games coming out of the pipeline, plus relatively "free" revenue by cashing in on prior opportunity costs by putting prior exclusives on PS. This year, if any, should be gangbusters for them. I can't imagine next year being as good with all these studios back in the development phase...

[dveio]

@crazy

Last Q3 '24, their overall revenue was up 61%. (Thanks to ABK.)

What's left?

5%. In 12 months.

After they increased GP for an average of +18% across all tiers.

After they put Call of Duty (!) D1 into GP.

5%.

That's crazy if you asked me.

[dveio]

Missed that:

Because the actual question for them today is:

• Let's look at retail revenue we've lost from games being D1 in GP, e.g. Call of Duty (just to name the biggest one).

• And ask ourselves: would we've had gained more than +8% in content & services with the retail model?

Keep in mind there was a price increase of GP tiers which came effective in Sept. 2024.

And Sept. 2024 was, logically, after (!) their last Q3.

So - no, +5% in revenue (!) ain't good.

[Lightning77]

Well what do you know. When you release good games, good consecutive 1st party you output you actually make money.

Minus hardware of course.

I'll give credit where it's due. MS is starting to capture that old 360 energy when it comes to games and releases. It took them 14 years of having a clue but they seem to be doing it now. All will be lost if they step on rakes like they're known to do. Who knows how long it'll last.

[franwex]

It took them essentially going third party but still making hardware to capture that energy.

[Knushwood Butt]

Revenue is revenue.
If by, 'make money', you mean profit, there's nothing here to show they made a penny of profit.

[Scissorman]

I'd imagine profit margins are either razor thin or non-existent. But I also think this will change over time. The one thing I can't wrap my head around is Microsoft's desire to create a next-generation console. No one is interested. Last month Xbox sold an estimated 50K units outside of the US. A 6% drop may seem like a low percentage but it's a drop from already low starting point, signaling that interest in Xbox hardware is approaching rock bottom.

[MrNinosan]

This report has nothing to do with MAKING money thou. It's revenue, not profit.

[MaximusPrime_]

"Xbox hardware down"
MS heading to the right direction

[MaximusPrime_]

So for those who disagreed, care to explain now that MS raising their prices?

[kpgs]

It's a good thing that Microsoft realized that releasing their games on Playstation would bring them revenue, NOT keeping them exclusive on their dying hardware.

[Obscure_Observer]

Yes!

Services up to 8% and Gaming Revenue up to 5%

Gamepass going BIG baby!

[yenevar]

Press X to doubt that their hardware revenue was only down 6%.

Hardware is only getting more and more expensive to make, ship and sell, and everything I have seen shows that their hardware was down 15+ percent month after month for the last quarter.

[Kekewei]

Opening up to Sony and Nintendo is definitely the right thing for Microsoft, even though it's bad for Xbox hardware. XS sales in East Asia hit rock bottom in last month, but Microsoft doesn't seem to care any more.

[Deathdeliverer]

True

[Deathdeliverer]

Embracing a 3rd party position definitely helping overall revenue. Services can be many things like EA play, the Ubisoft version of it, Gamepass of course, and probably other things I can’t think of. Also, consider how bad each year has been for Xbox. This is against last years numbers, same time period adjusted most likely. Could have been down 48% last year and now 6% above that. That’s why without legacy numbers and stake in the success of companies, debating and gloating numbers is crazy. Could have went from a dumpster inferno to a dumpster fire. This goes for any company, just using Microsoft as an example since that’s the thread. Now if you KNOW last year they were killing it same time, you’re stacking growth. Still. Not your benefit.

[anast]

Revenue doesn't tell a story. I would assume their profits aren't where they would like it to be, since they went mobile app and 3rd party publisher.

[Popsicle]

Agreed. Revenue and service growth is nice, but what is their cost on services provided? Net profits would paint a more clear picture.

[anast]

Exactly. The revenue stories are non-stories and when a CEO talks about growth and revenue he/she isn't saying anything.

[PanicMechanic]

It doesn’t matter if your revenue is high, because if your cost of sales and operating expenses are higher than revenue you are making a loss. So these numbers are cleverly manipulated to paint a certain picture. But it doesn’t matter if you aren’t making a profit. Revenue may be up but what about costs of running Ms gaming? Have costs increased or decreased YOY? Revenue is meaningless and the fact that MS fails to divulge profit margins directly tells you what you should know already

[Reaper22_]

You guys have no clue what you're talking about. Go read the financial report on their net profits. You guys think just because Sony sells a lot of consoles Microsoft isn't making any money on games and services. Well, you're wrong.

[Reaper22_]

Their profits last year was 171 Billion. Up 17% from the year before. How's that for a story?

[andy85]

This isn't really great reading is it? Theyve essentially gone 3rd party and only gained 5% with it? Given up their IPs for Sonys use for 5%. And this is revenue not profit. How are the usual seeing this as a massive win. Plus the fact that the consoles are jumping up $100. A regular series X is now more expensive than the Pro which everyone laughed at the proce. That's the final nail in the coffin consoles wise

[Ninver]

They can also thank big brother Sony for the help.

[timzone]

Preparing us for the next generation...