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Gaming continues to return growth for Microsoft. The company reported its fourth-quarter earnings today, and game division generated $357 million more in the three-month period that ended June 30 than in the same period in the previous year. That is up 11% year-over-year. Hardware was the big winner, as Microsoft is selling a lot more Xbox systems that also cost a lot more money thanks to the start of the Xbox Series X/S generation. The excitement for that hardware also overcame a drag from content and services, which cooled off relative to last year.
“Xbox hardware revenue increased 172% driven by higher price and volume of consoles sold due to the Xbox Series X/S launches,” reads the Microsoft earnings report. “Xbox content and services revenue decreased $128 million, or 4%, driven by a decline in third-party titles on a strong prior year comparable that benefitted from stay-at-home scenarios, offset in part by growth in Xbox Game Pass subscriptions and first-party titles.”
The decline in content and services lines up with expectations. More people stayed home and sought out games for entertainment last year than in 2021. This means that third-party games like Fortnite, Call of Duty: Warzone, and more were bringing in major revenue. That has likely cooled off as more people get vaccinated.
But as Microsoft points out, Xbox Game Pass continued to grow and helped counter declines in other areas. The company is also seeing strong performance for its first-party games. This is likely to only improve as Microsoft begins delivering on some of its bigger promises, like Halo: Infinite, Forza Horizon 5, and Starfield.
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