Xbox hardware revenue is down

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Key conclusions

  • Xbox hardware sales continued to fall 29% in 1Q25, but software and services revenue increased 61% year-over-year.
  • Despite the continued decline in hardware revenue, strategic moves like giving Game Pass Ultimate subscribers day one access to major titles are paying off.
  • Microsoft's gaming business revenue rose 43% in the first quarter, with 53 points of the net impact of the Activision deal.



Xbox Parent company Microsoft shared that the console giant experienced another downward trend in hardware sales in the first quarter of FY25, continuing its problems from the previous quarter. However, on the software and services front, Xbox is stronger year-over-year.

Over the past few years, sales of Xbox consoles have lagged behind those of rivals PlayStation and Nintendo. In July, when Microsoft released its FY24 financial report, Xbox hardware revenue for the fourth quarter was down 42% year over year. The latest results show that, although the decline has not stopped, the rate at which it previously occurred has slowed.


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In its Q1 FY25 earnings report, Microsoft announced some grim statistics for Xbox. While hardware revenue fell 29% year-over-year in the first quarter, Xbox's content and services business grew 61% year-over-year. Interestingly, an Xbox parent shared that the 53 points of net impact here was achieved solely by the Activision deal. Overall, revenue from Microsoft's gaming business grew 43% in the first quarter, with 43 points of net impact coming from the reacquisition of Activision.


Xbox hardware sales continue to decline, while the Xbox Game Pass business is booming

Although the rate of decline is less than last time, the decline in hardware revenue is a problem that Xbox has yet to overcome. While major acquisitions have strengthened the pipeline of the Microsoft-owned brand, the right strategy to use this and improve console sales is still easier said than done. On the other hand, its recent decision will allow Game Pass Ultimate subscribers to gain access from day one Call of Duty: Black Ops 6the main first title seems to pay very well. As a result, the newest COD the record achieved the mark of being the game with the most players on day one, as well as the game that would attract the most Xbox Game Pass subscribers on launch day.


Like other first-person studio games Indiana Jones: The Great Circle are on the horizon, the times ahead look exciting for Xbox fans, especially Game Pass Ultimate subscribers who will get access to them on day one. Over the next year, it will be interesting to watch how these titles perform and how they affect Xbox's growth.

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