Microsoft held its Q2 earnings call today, and the company reported that despite gaming revenue growing 9% year-over-year, Xbox hardware sales were down.
The increase in revenue was instead driven byMicrosoft's acquisition of Activision Blizzard and Xbox Game Pass subscription number. Xbox hardware revenue fell 25% due to the company selling fewer consoles.
The company didn't say much about games overall, which was interesting. However, Microsoft is investing heavily in both AI and cloud services, with revenue in the latter category rising 23% year-over-year to $168.9 billion.
“This quarter, Microsoft Cloud surpassed $50 billion in revenue for the first time, up 26% year over year, reflecting the strength of our platform and accelerating demand,” Microsoft CEO Satya Nadella said on the earnings call.
Microsoft has pretty much cornered the Cloud gaming market thanks to Game Pass, whichraised their prices last year. It appears that healthy subscription numbers, despite the push-back felt by many consumers at the time, have offset the company's hardware losses.
Xbox Game Pass is still a strong value, but its long-term costs are increasing
Xbox Game Pass has historically been an incredible value for gamers looking for a rotating library of games, but it has recently struggled to find balance.
“In gaming, we're committed to delivering great games across Xbox, PC cloud and all other devices, and we saw record PC players and paid streaming hours on Xbox,” Microsoft CFO Amy Hood said on the call.
Microsoft could be uniquely positioned for a time theregaming hardware may have problems due to lack of RAM. Thanks to its partnership with OpenAI and significant investment in cloud infrastructure, Xbox may be in a better position than many think.
