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Microsoft Q2 Xbox Gaming (TVOD) Revenue Drops 13%, Game Pass Subs Hit Record High

Microsoft Jan. 24 reported its second-quarter (ended Dec. 31, 2022) Xbox gaming segment revenue decreased $684 million (13%) to $4.76 billion, from $5.44 billion in the prior-year period, driven by declines in Xbox content, services and Xbox hardware — which includes Microsoft Movies & TV content transactions.

Xbox is part of Microsoft’s “More Personal Computing” business segment, which saw Q2 revenue drop almost 19% to $14.2 billion, from $17.5 billion in the previous-year period.

Microsoft attributed the content and services revenue decline due to strong prior-year revenue from first-party game launches, undermined by drops in first-party content and a lower rate of monetization in third-party content, and a 13% decrease in Xbox hardware revenue, offset in part by growth in Xbox Game Pass subscriptions.

On the positive side, Xbox Game Pass subscriptions hit a record 120 million monthly active users during the quarter.

“We saw new highs for Game Pass subscriptions, game streaming hours, and monthly active devices,” CEO Satya Nadella said on the fiscal webcast.

Through six months of the fiscal year, overall gaming revenue is down $667 million, or 7%, driven by declines in content and services and Xbox hardware. Xbox content and services revenue decreased 8%, driven by declines in first-party content and in third-party content, with lower rate of monetization and engagement hours, offset in part by growth in Xbox Game Pass subscriptions. Xbox hardware revenue decreased 5% driven by lower price of consoles sold.

Microsft, which said it plans to cancel 10,000 company positions in 2023, said it recorded $800 million in severance related costs in 2022.

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