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Xbox + Microsoft FY23 Q4 Results: Total Gaming +1% ($3.491B), Content & Services +5% (Game Pass growth), Hardware -13%

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Gaming revenue increased $36 million or 1% driven by growth in Xbox content and services, offset in part by a decline in Xbox hardware. Xbox content and services revenue increased 5% driven by growth in third-party content and Xbox Game Pass. Xbox hardware revenue decreased 13% driven by lower volume of consoles sold.

The following graph is my own with calculated splits between Content & Services and Hardware

Xbox_Revenue_by_Welfare_JBP.png


Microsoft Overview
  • Revenue was $56.2 billion and increased 8% (up 10% in constant currency)
  • Operating income was $24.3 billion and increased 18% (up 21% in constant currency)
  • Net income was $20.1 billion and increased 20% (up 23% in constant currency)
  • Diluted earnings per share was $2.69 and increased 21% (up 23% in constant currency)

FY23 Q4 - Press Releases - Investor Relations - Microsoft
 
Zaimokuza said:
Does this mean Microsoft is getting better at extracting more money from their userbase rather than expanding it?
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not even that. never forget about the relentless bull of inflation. small gains in inflated currency may as well be flat to loss. CPI inflation (likely underreported the past years: 2021 4%, 2022 8.7 2023 4.0 so thats 16.7% in 3 years
 
Zaimokuza said:
Does this mean Microsoft is getting better at extracting more money from their userbase rather than expanding it?
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nope. revenue are flat. In any case with the acquisition of Activision , revenue will improve greatly very soon . Without the acquisition honestly the future of Xbox would have been very much at risk Imo, but with Activision at least in terms of revenue, profit and services we will see significant growth very soon. They should get to sony's levels on these aspects .


The problem is the console hardware.
For the console hardware sales I also expect a growth thanks to Activision, but not that substantial imo considering that Cod will remain a multiplatform game.
 
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Gaming performance was a bit of a miss from expectations

"And in Gaming, we expect revenue growth in the mid to high-single digits. We expect Xbox content and services revenue growth in the low to mid-teens driven by third-party and first-party content as well as Xbox Game Pass." (https://view.officeapps.live.com/op...?version=ff97d663-961e-282d-46ce-94f83458ac92)

salesguy said:
not even that. never forget about the relentless bull of inflation.
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The increase of game prices would have one reason.
salesguy said:
small gains in inflated currency may as well be flat to loss.
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Is this about currency changes? Xbox content and services is 6% in CC instead of the 5% that they report.

Zaimokuza said:
Does this mean Microsoft is getting better at extracting more money from their userbase rather than expanding it?
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Not necessarily, the increase might have come from PC revenue/users but suspect the arpu per console user has also increased.
 
reksveks said:
Is this about currency changes? Xbox content and services is 6% in CC instead of the 5% that they report.
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i'm on unclear on that exactly, but a quick google seems to say that relates more to companies that do business overseas adjusting for different national currency fluctuations in a given quarter etc, not so much actually dealing with ongoing long term inflation.

Companies that sell products overseas will often see their reported revenue and profit become distorted by factors they have little control over. For example, when the greenback strengthens against other currencies it subsequently weighs on international financial figures once they are converted back into U.S. dollars. Business executives believe these currency fluctuations mask the true financial performance of a company and, as a result, often choose to also disclose figures that assume that exchange rates during the period did not move.
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you are correct on the game prices though. i suppose to be fair we need to look at actual price increases which in technology can be less than inflation. we have $70 games. microtransactions would be hard to track but should trend to increases. xbox hardware actually did see some increase prices. Gamepass has an announced increase. Many of the prices for Xbox could have stayed stable I suppose, as most of the increases I mentioned besides the $70 games have not taken place yet.
 
salesguy said:
i'm on unclear on that exactly, but a quick google seems to say that relates more to companies that do business overseas adjusting for different national currency fluctuations in a given quarter etc, not so much actually dealing with ongoing long term inflation.
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Microsoft fortunately does give us CC (constant currency) numbers for xbox content and other divisions so we can account for that.

Given the USD has gotten stronger, their numbers generally get decreased.

Xbox content growth went up 5% but 6% in cc.

Similarly because the JPY got weaker (now it's relatively flat YoY), Sony's numbers in JPY got inflated a bit. They unfortunately get their costs also inflated.

salesguy said:
xbox hardware actually did see some increase prices. Gamepass has an announced increase. Many of the prices for Xbox could have stayed stable I suppose, as most of the increases I mentioned besides the $70 games have not taken place yet.
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When did the xbox hardware price increase happen again? July? If so, it wouldn't have been in this earning report.

www.videogameschronicle.com

Microsoft is raising Xbox Series X and Game Pass prices | VGC

Subscription prices will increase in July, with console prices rising the following month…
www.videogameschronicle.com www.videogameschronicle.com

Price increases will be in the next earnings report.
 
salesguy said:
not even that. never forget about the relentless bull of inflation. small gains in inflated currency may as well be flat to loss. CPI inflation (likely underreported the past years: 2021 4%, 2022 8.7 2023 4.0 so thats 16.7% in 3 years
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Inflation is compounding, so that works out to 17.6% and yes, the actual inflation is likely quite a bit higher.

Anyways, the drop in HW sales is quite worrisome, especially given Sony's boosted production out of the pandemic. Though, again, I guess getting rid of the HW and going all in on services is the plan in the end, so it might be okay after all? (probably not)
 
Does Activision generate a lot of profit? I feel like they were hanging on for dear life with COD, which is why they wanted to sell. seems like it takes a lot of resources to keep that machine running
 
Profit and revenue are great as always. Hardware sales were expected to fall but I guess Redfall underperformance made values lower.

By and large, expected result with what we have right now.
 
With ABK, they could hit U$26~30 billion in revenue next year. That's amazing. But any guess on how Microsoft could improve Xbox console sales?

Right now, they should fix the Xbox Series X stock, launch a U$399,90 Digital Xbox Series X, officially cut the Series S price to U$239,90 and launch the Series S Black for U$299,90. Take some marketing rights and launch bundles with games like EA Football, Madden, NBA 2K and Mortal Kombat 1. That could improve something.
 
Concurseiro do Futuro said:
With ABK, they could hit U$26~30 billion in revenue next year. That's amazing. But any guess on how Microsoft could improve Xbox console sales?

Right now, they should fix the Xbox Series X stock, launch a U$399,90 Digital Xbox Series X, officially cut the Series S price to U$239,90 and launch the Series S Black for U$299,90. Take some marketing rights and launch bundles with games like EA Football, Madden, NBA 2K and Mortal Kombat 1. That could improve something.
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Supposedly they did fix the stock but that change would have been end of June so the likelihood of showing up here is low.
 
Xbox_Revenue_by_Welfare_JBP.png

We know that Oct to Dec 2022 was 3.2 million units so it looks like Jan to Mar was 1.3 million and Apr to June was 1.5 million. Of course we do not know each quarters X/S splits but that can't be helped.
 
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The main issue for Xbox hardware sales, and maybe even past Forza 2023 and Starfield, is that they simply don't have attractive software. The same issue we keep repeating. Xbox has no compelling games and to make matters worse apparently the entire company has forgetten that marketing exists outside of twitter posts and new controller variants. Or that is just another symptom of Xbox simply having no meaningful exclusives. Regardless, there is simply little reason to acquire an Xbox due to the pitiful amount of exclusive games on it. If AAA games, that are well received unlike the mixed to negatively received games of Minecraft Legends and Redfall, I would harbour a brave guess that Xbox hardware sales would improve.

Without an increase of well received exclusives that come out at a steady pace, this is the likely result. Decreasing hardware sales YoY.

Edit: Actually improving their marketing would help as well. I understand Xbox has had basically nothing major to promote since Halo Infinite but I feel like their marketing has been non-existent. Starfield only really starting it's marketing campaign now with some animated shorts, but I'm not even sure if they'll ramp in August. It feels like their marketing team as atrophied since 2020 and 2021. Outside of, like I said, twitter posts, as well as big conferences.

Well see at Gamescom in a few weeks if Xbox marketing will receive any major momentum
 
Concurseiro do Futuro said:
Right now, they should fix the Xbox Series X stock, launch a U$399,90 Digital Xbox Series X, officially cut the Series S price to U$239,90 and launch the Series S Black for U$299,90. Take some marketing rights and launch bundles with games like EA Football, Madden, NBA 2K and Mortal Kombat 1. That could improve something.
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And what's the point if it just generates more losses due to hardware?

They way forward is marketing and more acquisitions. With ABK I expect revenue to grow all the time due to mobile, regardless of how much consoles sell.
 
All things considered, not just console sales, but overall, I don't think it's that dramatic. Microsoft will be fine, especially so once Starfield is released, ABK is finalized, and their pipeline is normalized, which is certainly getting there.

I'm actually expecting a PS3 2nd-half type of excellence hardware and software wise for the Series X/S.
 
Flakster99 said:
All things considered, not just console sales, but overall, I don't think it's that dramatic. Microsoft will be fine, especially so once Starfield is released, ABK is finalized, and their pipeline is normalized, which is certainly getting there.

I'm actually expecting a PS3 2nd-half type of excellence hardware and software wise for the Series X/S.
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Xbox revenues and profits will explode soon, for sure, but i don't think Microsoft will work on hardware side.
 
It is weird seeing people thinking the June show (which was good) was good enough for an increase in Xbox sales over the quarter? I mean the show was on June 13th. The Fiscal Quarter was between April and June 30th. Meaning there was only 17 days between the showcase and the end of the fiscal quarter. Even if they increased sales, it'd likely only have been marginally and lacked the time to actually impact hardware sales for the quarter. I mean for the rest of the Quarter they had what, two games that bombed and then nothing?

If hardware sales are down YoY with q1 FY 2023 in q1 FY 2024 significantly (more then 10% and I'd argue even 5%), despite Starfield and the showcase (which isn't unlikely considering how that result is decently higher then this one), then I think its worth really thinking about the future viability of Xbox hardware to a more serious degree.

To put that in some guesstimate numbers, using this reply:
Luminoth 4545 said:
We know that Oct to Dec 2022 was 3.2 million units so it looks like Jan to Mar was 1.3 million and Apr to June was 1.5 million. Of course we do not know each quarters X/S splits but that can't be helped.
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Multiplying 1.5 million (which is the estimated Apr to June 2023 Xbox sales numbers) by 0.13 and then using that result to add to the 1.5 million we arrive at 1.7 million (rounding up from 1.695) for hardware sales for Q4 FY 2022 sales (which was Apr to June 2022). Reading this article shows that Xbox hardware increased by 0.13% from Q4 FY 2022 (Apr to June) to Q1 FY 2023 (July to September). Multiplying the 1.7 million, although I just used the 1.695 million number I rounded up from, by 0.13 again, and then adding that result to the unrounded 1.695 million, that gives us around 1.9 million Xbox X|S sold in Q1 FY 2023.

In order to even match that, Xbox sales would have to increase by 22% between July and September. Otherwise it would be a some percentage point drop over Q1 FY 2023.

A pretty tall task that likely requires an increase in Series X supply, a general increase of sales of Xboxes after the showcase, and a Starfield that really hits with great reviews and strong word of mouth

I will say as a disclaimer (that is probably too late) that this is really rough math and I probably got something wrong but I think this is likely around the ballpark of reality.
 
Continue to be shocked at how a console in full year 3 can have decline in hardware sales (well revenue in this case, but sales threads point to unit decline as well).

Screenshot-2023-07-26-at-00-06-49.png

To put this into perspective, these are usually the peak years of hardware revenue. Prices largely go down from here, as we see with the XB1 gen.

Big miss versus internal expectations
  • Expected +10-15% C&S, got +5%
  • Expected +5% total, got +1%
Next quarter is what is really surprising. Starfield launch, the biggest Xbox exclusive since like Halo 3 in 2007, and the guidance is shockingly low in both hardware and software:
  • Total, +5%
  • C&S, 5-9%
  • From this we can work out hardware expectations for the Q:
    • -10% to +5%
Despite releasing Starfield, MSFT is forecasting at most a 5% increase in hardware revenue and even takes the possibility of a decline in hardware revenue.
 
They certainly are starting to close all loopholes to increase revenue.

The Xbox Live Gold : Gamepass conversion is not 1:1 anymore, they increased prices in all regions but the US, and now Gamepass core will launch.

There are rumours that the Microsoft rewards points are no longer available to purchase GamePass.

They definitely will start to see more revenue from all the above, but is yet to be seen if they will start to lose subscribers or not.
 
kazuyamishima said:
They certainly are starting to close all loopholes to increase revenue.

The Xbox Live Gold : Gamepass conversion is not 1:1 anymore, they increased prices in all regions but the US, and now Gamepass core will launch.

There are rumours that the Microsoft rewards points are no longer available to purchase GamePass.

They definitely will start to see more revenue from all the above, but is yet to be seen if they will start to lose subscribers or not.
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I can’t believe how long its been since they announced numbers for GP.
 
Pancracio17 said:
Bad numbers. Series X stock is puzzling, does their market research not justify higher production?
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I do not know but something is clearly wrong.

My question is how fast can they change orders to adjust for demand like this? I know it's not instantaneous but I would have thought a year of obvious S:X ratio problems would have been enough to pivot somewhat. Perhaps not.

They also have not gone for a 6nm revision like Sony has. I'm wondering if the economics don't make sense for them or if they're waiting for something in particular, some larger revision?
 
Tiddums said:
I do not know but something is clearly wrong.

My question is how fast can they change orders to adjust for demand like this? I know it's not instantaneous but I would have thought a year of obvious S:X ratio problems would have been enough to pivot somewhat. Perhaps not.

They also have not gone for a 6nm revision like Sony has. I'm wondering if the economics don't make sense for them or if they're waiting for something in particular, some larger revision?
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I'm of the opinion it's a economic of scale issue as to why they haven't made a 6nm revision. I also don't think supply issue in regards to the Series X but a demand issue.

The fact that Microsoft touted Gamepass subscriber numbers as a measurement of success previously and is no longer sharing the number is telling. It's been 18 months since numbers were shared, and instead they spoke about gamepass engagement.

It is almost certain that the console is mostly likely sold/shipped less than the XB1 launched aligned is very poor. I think we can comfortably say that Redfall and Minecraft Legends didn't meet there expectations.
 
MrTired said:
I think we can comfortably say that Redfall and Minecraft Legends didn't meet there expectations.
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And whose expectations did they meet? Minecraft Legends underperformed and Redfall had a very bad launch. By and large since the release of Halo Infinite they haven't produced anything big. It's been 2 years at this point.

I am not concerned though as long as Xbox is not in red, Xbox won't go anywhere. And Microsoft won't start releasing their games on Playstation either. Post ABK, Xbox will be self sustainable simply due to mobile input. With more acquisitions, it will be even more. COD mobile is brining half of all COD revenue, King is a monster and even Blizzard with mobile is doing quite good. Not a big deal.
 
Pancracio17 said:
Bad numbers. Series X stock is puzzling, does their market research not justify higher production?
Click to expand...

Tiddums said:
I do not know but something is clearly wrong.

My question is how fast can they change orders to adjust for demand like this? I know it's not instantaneous but I would have thought a year of obvious S:X ratio problems would have been enough to pivot somewhat. Perhaps not.

They also have not gone for a 6nm revision like Sony has. I'm wondering if the economics don't make sense for them or if they're waiting for something in particular, some larger revision?
Click to expand...

MrTired said:
I'm of the opinion it's a economic of scale issue as to why they haven't made a 6nm revision. I also don't think supply issue in regards to the Series X but a demand issue.

The fact that Microsoft touted Gamepass subscriber numbers as a measurement of success previously and is no longer sharing the number is telling. It's been 18 months since numbers were shared, and instead they spoke about gamepass engagement.

It is almost certain that the console is mostly likely sold/shipped less than the XB1 launched aligned is very poor. I think we can comfortably say that Redfall and Minecraft Legends didn't meet there expectations.
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They made the bad call of allocating Series X stock to build up their Cloud initiative, when it would have been way more benefitial to release to consumers.

Like Phil mentionned, they are going to improve the X stock, but it will take a bit of time and won't suddenly make the console sales jump.

Starfield will be key now, if they managed to have stock alongside it and the game delivers, then we could see sales improving in September and afterward.
 
Lelouch0612 said:
They made the bad call of allocating Series X stock to build up their Cloud initiative, when it would have been way more benefitial to release to consumers.
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I think Microsoft underestimated people's desire to buy expensive hardware - PS sales despite price increase, GPU sales demonstrate that people are willing to buy expensive hardware as long as it is a "hot" thing.

Lelouch0612 said:
They made the bad call of allocating Series X stock to build up their Cloud initiative, when it would have been way more benefitial to release to consumers.
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The thing is that it is hard to say if it was a good bad or call. But I do think they should have sent more consoles to retail as they found out that the most of the people using cloud are people who own the console rather than the newcomers. That might be the bet they lost - it will be easier for Sony to bring more people cloud due to that.
 
Lelouch0612 said:
They made the bad call of allocating Series X stock to build up their Cloud initiative, when it would have been way more benefitial to release to consumers.

Like Phil mentionned, they are going to improve the X stock, but it will take a bit of time and won't suddenly make the console sales jump.

Starfield will be key now, if they managed to have stock alongside it and the game delivers, then we could see sales improving in September and afterward.
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But how long does something like that take? I was mostly surprised because the guidance for the next quarter doesnt seem to be factoring in any hardware improvements. I figured if Series X stock was improving wed already see signs of it, but maybe it does actually take that long.
 
MrTired said:
I'm of the opinion it's a economic of scale issue as to why they haven't made a 6nm revision. I also don't think supply issue in regards to the Series X but a demand issue.
Click to expand...

And I agree. Starfield will be interesting to watch not to see if it sells a boatload of copies (I think it will, despite Game Pass), but to see if it sells a boatload of Xboxes.
 
Pancracio17 said:
But how long does something like that take? I was mostly surprised because the guidance for the next quarter doesnt seem to be factoring in any hardware improvements. I figured if Series X stock was improving wed already see signs of it, but maybe it does actually take that long.
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I feel like part of that is just them being extremely conservative. Spencer made an announcement at the showcase that they were going to have better stock+ the new model. Again I think a lot of it is being unsure how Starfield will land.
 
GodlyTrident said:
And what's the point if it just generates more losses due to hardware?

They way forward is marketing and more acquisitions. With ABK I expect revenue to grow all the time due to mobile, regardless of how much consoles sell.
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More acquisitions is unlikely. Why do they need more anyway? If Bethesda and ABK didnt do the trick literally nothing will. There's not that many free devs out there anyway, what Ubi and EA? But the bigger issue is after the hell they went through to get activision cleared, they just cant make another big acquisition soon due to anti trust.

I personally (yes I'm known as loony) is that "software" is an ephemeral concept that tends to fizzle out. Especially exclusives. We are seeing that play out right now with Starfield, where the games reveal failed to juice hardware sales and MS Xbox guidance for the starfield quarter is lackluster. Meaning even they dont expect much. There was a guy on twitter saying something like "with all these studios, I expect no less than 6-8 big first party releases a year MS!". Well I've seen this movie before, I told him only half jokingly, you'll get two and you'll like it. MS is probably going to cut dev jobs just as they buy more. They cut jobs at 343 for example. This is the same company that bought Nokia, a big expense at the time, as part of their windows phone push, then literally IIRC a few months later completely changed course and dismantled it.

The hardware losses angle though is interesting, because there was a time it seemed like MS would do whatever it took to keep the Xbox hardware sales viable. Big cuts on Xbox and Xbox One. They have shown absolutely no tendency to be aggressive on XBS pricing. In fact raising them outside the USA. the opposite! Well, I guess thinking, the S for 249 last holiday was actually probably really aggressive, it just didnt work. Point being, I'm somewhat surprised they havent gotten aggressive on XBS pricing. And I mean something wild like "Xbox Series X is now 399 worldwide! Series S 199". Something big needed to rescue the brand. They've been willing to do that in the past but dont seem to now. I do think there are certain laws against selling products under cost though.
 
I think a game like starfield could potentially swing significant numbers of on-the-fence users to choose xbox (or at least a xbox supported platform) over PS early in the gen but were 3 years in and most users were locked into their ecosystems 5-10 years ago.
 
NobsPlaystation said:
anyone has Hardware estimates for this Quarter they just reported?
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Assuming ~10% decline in unit sales and similar US to WW ratio as prior full years we get 1.15-1.25M sold (not shipped)

salesguy said:
The hardware losses angle though is interesting, because there was a time it seemed like MS would do whatever it took to keep the Xbox hardware sales viable. Big cuts on Xbox and Xbox One. They have shown absolutely no tendency to be aggressive on XBS pricing.
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Thats because their hardware revenue has already collapsed. More price cuts will result in a place half of what XB1 did in a few years.

Screenshot-2023-07-26-at-00-06-49.png
 
My shipment (not sell through) estimates for Xbox hardware

This quarter: ~1.2M

Xbox 360 official (launch aligned): 20.3M
Xbox Series total: ~23.9M
Xbox One total (launch aligned): ~24.7M
 
Welfare said:
My shipment (not sell through) estimates for Xbox hardware

This quarter: ~1.2M

Xbox 360 official (launch aligned): 20.3M
Xbox Series total: ~23.9M
Xbox One total (launch aligned): ~24.7M
Click to expand...
Your prediction for Q1? Could Starfield move 2 million consoles?
 
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