Call of Duty’s Activision Blizzard Actually Made Microsoft and Xbox Lose Money Last Quarter, and It’s Nothing to do With the $69B Price Tag Either

The acquisition of Activision Blizzard by Microsoft was a significant move in the gaming industry. Despite the $68.7 billion deal, it was expected to bring more revenue with promises like Call of Duty on Game Pass. But the recent financial report has shown a twist. 

In the fourth quarter of FY24, the company reported an operating loss of $570 million from the acquisition, even though the acquisition generated $1.68 billion in revenue.

The Promise of Call of Duty May Not Have Been Quite Enough

According to the earnings press release, for the fourth quarter of the fiscal year 2024, the Activision merger generated $1.68 billion in revenue for Microsoft. However, the associated costs led to an operating loss of $570 million. This loss, combined with a $350 million loss from the previous quarter, brought the total impact to a staggering $920 million. 

Despite these losses, the company’s overall gaming revenue did see a notable increase in the earlier part of the fiscal year. For instance, in the second quarter of FY24, Xbox’s revenues were up 49% year-over-year, largely due to the integration. This increase was attributed to the popular titles like Call of Duty, and the vast user base that Activision brought to the table.

LOL.

The net impact from the Activision acquisition resulted in an operating loss of $0.57 billion for FY24 Q4. Despite generating revenue of $1.68 billion, the costs associated with the acquisition and integration exceeded the gross margin, leading to an operating loss. pic.twitter.com/CTgCaycmQM

— James (@JamiesAct) July 30, 2024

The financial strain from the acquisition also led to significant workforce reductions. In January, the company announced layoffs of approximately 1,900 employees from its gaming division, representing about 9% of its gaming workforce.

#Activision still isn’t profitable for #Xbox and has seen 3 quarters of heavy loss in a row, with acquisition integration, transaction and operating costs still negating margins

Q4 -$570m
Q3 -$350m
Q2 -$440m

Makes for total ABK losses of $1.4 billion in just the last 3 quarters pic.twitter.com/0bkgiH3b7h

— NIB (@nib95_) July 31, 2024

The benefits of the acquisition have not been uniformly distributed across the company’s gaming division. Console sales, for instance, have continued to decline, dropping 42% year-over-year in the fourth quarter. This has affected not just Microsoft, but also other major players like Sony and Nintendo. 

Microsoft Expects More Growth in The Future From The Merger

Despite the short-term financial challenges, Microsoft remains optimistic about the long-term benefits of the acquisition. The company expects continued growth in its gaming revenue, driven by the expanded gaming portfolio and increased monthly active users. 

The company’s CEO Satya Nadella highlighted the record number of monthly active users across all platforms, attributing much of this growth to the inclusion of Activision’s popular titles, and upcoming ones like Black Ops 6.

Let’s be honest… black ops 6 looks hype
byu/Pretend-Ad-6453 inCODZombies

Looking ahead, the company has laid out plans for its gaming division, including the release of major titles like Indiana Jones and the Great Circle and Avowed by Obsidian Entertainment.

And so, Microsoft’s Activision Blizzard acquisition has had a mixed impact on the company’s financials. While it has driven significant revenue growth in gaming, the high integration costs have resulted in operating losses.

What do you think of the company’s future? Let us know in the comments!