Microsoft is seeing lower revenue from Xbox content due to fewer third-party titles

Microsoft posted significantly higher sales and profits in the past third quarter, but revenues fell slightly in the Xbox services and content area. The company explains this by pointing to a decline in third-party titles.

Revenue in the Xbox content and services subcategory was down 4 percent from the same period a year ago by $128 million. That according to the quarterly figures. Microsoft explains this drop by pointing to a drop in third-party titles. Probably not so much fewer titles, but fewer third-party games sold. The company mainly refers to the strong previous year in which many people were at home, which actually increased income at the time.

This drop could have been bigger, but according to Microsoft, sales of first-party titles and a growth in Xbox Game Pass subscriptions prevented that. Microsoft does not mention exact numbers. The last time the company mentioned the number of Game Pass subscriptions was in January; the fourth quarter of 2020 was then closed with a total of 18 million subscribers. That was 3 million more than in September last year.

Things went better in the overarching Gaming category. Revenues grew by $357 million, or 11 percent. Microsoft attributes this growth mainly to the increased sales of Xbox hardware, although the company does not mention numbers here either. Xbox hardware sales increased by 172 percent, which is entirely explained by the higher price and sales volume of the Xbox Series X and S consoles. In a verbal explanation of the quarterly figures CEO Satya Nadella says the Xbox Series S and X are the fastest selling consoles ever.

As has been for some time, Microsoft’s Intelligent Cloud business has been a key growth engine for the company. Revenue from this segment rose 30 percent to $17.4 billion. Revenue from server products and cloud services increased by 34 percent, mainly attributed to Azure’s revenue growth of 51 percent.

Revenues in the Windows OEM category were down 3 percent from the same period a year ago. Microsoft says there is still continued PC demand, but the company has been experiencing supply issues, citing chip shortages. Revenues in the overall Windows category were up 7 percent to $432 million, driven by demand for Microsoft 365.

Microsoft’s total revenue was $46.2 billion, an increase of 21 percent. Net profit was $16.5 billion, up 47 percent.