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Microsoft‘s gaming division generated $1.657 billion during its fiscal Q4, and that is up $44 million or 3 percent year-over-year. Xbox game sales and services picked up a lot of momentum and were more than enough to make up for a dip in revenues from hardware.

Console sales are bringing in less cash for Microsoft as the average price for an Xbox One continues to fall. The company released the Xbox One S last year as part of an effort to protect the price on its system, and it will do something similar later this year when it launches the more powerful Xbox One X. It’s the game sales, Xbox Live subscriptions, and other services that are bringing in the stacks for Microsoft now.

“Xbox software and services revenue grew 11 percent driven by continued momentum in digital distribution and strong game title performance,” Microsoft wrote in a note to investors. “Xbox Live monthly active users grew 8 percent to 53 million, with continued growth across Xbox One, Windows 10, and mobile platforms.”

Microsoft was also able to save some cash on the other end of the equation by pulling back on the marketing budget for Xbox One.


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“Operating expenses decreased $318 million or 10 percent, primarily due to a reduction in phone expenses and Surface and Xbox marketing expenses in the prior year,” the company wrote in its financial report.

Microsoft is still in something of a rebuilding pattern with the Xbox program. The division is still selling games and getting people into its service. That suggests the attach rate for the Xbox One is relatively healthy. But the Xbox is still well behind Sony’s PlayStation 4 worldwide, and the new Xbox One X — which is due out in November — will have a tough time changing that.


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