Xbox Grows (Only) Thanks to Activision Blizzard in Q1 FY25
– 2 min read
Microsoft's gaming revenue grew 43 per cent year over year in the last quarter. While Xbox content and services grew even more strongly, hardware revenue fell by almost 30 per cent. However, the outlook for the current quarter is cautious, despite the record launch of Call of Duty: Black Ops 6.
From July to September 2024, Microsoft's gaming revenue grew 43% year over year. Excluding the impact of the Activision Blizzard acquisition, the division would not have grown. Xbox content and services revenue grew 61%, including 53 points of net impact from the Activision Blizzard acquisition. Xbox hardware revenue declined 29%. "Results were ahead of expectations driven by stronger-than-expected performance in both first- and third-party content as well as consoles", said CFO Amy Hood.
Microsoft-CEO Satya Nadella: "You already see this transformation in our results, as we diversify the ways that gamers access our content. We set new records for monthly active users in the quarter, as more players than ever play our games across devices and on the Xbox platform. Game Pass also set a new Q1 record for total revenue and average revenue per subscriber. And, as we look ahead, our IP across our studios has never been stronger."
Despite the best launch ever for a Call of Duty game (Black Ops 6), the outlook is rather down-to-earth. Microsoft will release Microsoft Flight Simulator 2024 and Indiana Jones and the Great Circle during the quarter. Diablo IV: Vessel of Hatred also falls into the period. Amy Hood: "And in Gaming, we expect revenue to decline in the high single digits due to hardware. We expect Xbox content and services revenue growth to be relatively flat. We're excited about last week's launch of Call of Duty where we saw the most Game Pass subscriber adds we've ever seen on a launch day. There are two things about the launch that are different than the Call of Duty launch a year ago where revenue was mostly recognized in the quarter of purchase. First, the game is available on Game Pass so for players who play through Game Pass, the subscription revenue is recognized over time. Second, the game requires an online connection to play so even for players who purchase the standalone game, revenue recognition will also occur ratably over time."
The Xbox business is part of the More Personal Computing Division, which also includes Windows OEM and Devices, and Search and News Advertising. The division generated revenues of $13.2 billion (+17%; €12.2 billion). The acquisition of Activision Blizzard contributed 15 percentage points of growth.
The result for Microsoft as a whole looks like this: revenue was $65.6 billion (+16%; €60.4 billion), net income was $24.7 billion (11%; €22.7 billion). "AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process," said Satya Nadella, chairman and chief executive officer of Microsoft. "We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools to drive new growth and operating leverage."
"Strong execution by our sales teams and partners delivered a solid start to our fiscal year with Microsoft Cloud revenue of $38.9 billion, up 22% year-over-year," said Amy Hood, executive vice president and chief financial officer of Microsoft.
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