Microsoft’s Xbox gaming system remains a market leader in the space, but is expected to see a slowdown in sales next quarter.
Revenue for the technology company’s Xbox content and services segment increased 4 percent year-over-year, helping contribute to Microsoft’s strong third-quarter earnings. However, the segment faces tougher comparisons to previous pandemic-boosted quarters and is expected to see sales decline mid-single digits next quarter, even as engagement is anticipated to remain above pre-pandemic levels.
Hardware sales on Microsoft’s OEM, Surface and Xbox consoles are also expected to decline next quarter due to supply chain constraints from the COVID-19-induced shutdowns in China.
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In an earnings call Tuesday, Microsoft CEO Satya Nadella said the company’s Xbox Series S and Series X consoles had taken market share globally for the past two quarters and were the market leaders among nex-gen consoles in the United States, Canada, the UK and western Europe.
Xbox’s gaming revenue was up 6 percent year-over-year, hardware sales increased 14 percent and services jumped 4 percent.
More than 10 million users to date have streamed Microsoft’s games, many of which are now also available on phones and tablets, Nadella said. The hope is to expand Microsoft’s gaming offerings using the Azure cloud system, in order to develop new capabilities and better connect users.
“Our ambition is to power gamers to play when and how and where they want,” Nadella said on the call.
Microsoft’s overall revenue increased 18 percent year-over-year to reach $49.4 billion and net income grew 8 percent to reach $16.7 billion. These increases were primarily driven by strength in the cloud computing segment. LinkedIn also saw record engagement driven by the shifting job market, with the number of hires on the networking platform increasing 88 percent.
Company leaders notably did not speak about the company’s pending acquisition of gaming giant Activision Blizzard, which would help boost its share of the gaming space.
The $68.7 billion deal is expected to close in Microsoft’s fiscal year ending June 30, 2023, pending regulatory and shareholder approval.
However, Activision Blizzard continues to face legal troubles, which may threaten the merger. To start, Activision Blizzard is in the midst of an insider trading probe concerning wagers made in the days before the acquisition was announced. The video game company recently reached an $18 million settlement with the U.S. Equal Employment Opportunity Commission, but continues to face several lawsuits involving sexual harassment allegations at the company.
Activision, meanwhile, cited increased legal and professional fees related to the acquisition as weighing on its recent earnings performance.
