Xbox Posts Massive Hardware Sales Decline, But It’s Not All Bad News

The Xbox Series X and S will be four years old this year, and Microsoft’s latest earnings call has revealed that its newest generation of consoles just aren’t selling like they used to. While software and service sales have been strong, helped along by the massive Activision acquisition, hardware sales have seen a sharp decline.

In its Q4 earnings presentation for the 2024 fiscal year, Microsoft noted that its gaming hardware sales have decreased significantly, with a 42% decline compared to the same period last year. Despite this, the company’s overall gaming revenue was up 44%, with a 61% increase in content and services revenue that Microsoft says was “slightly ahead of expectations.” Both of these growth figures were positively impacted by the Activision purchase, Microsoft says.

The call also suggests that third-party content may not have performed as well as expected for Xbox in Q4, with Microsoft noting that “stronger-than-expected performance in first-party content was partially offset by third-party content performance.”

Despite the sharp decline in hardware sales, the figures aren’t likely to come as a shock for Microsoft–in fact, its future outlook notes that “hardware revenue will again decline year-over-year.” To offset this continued decline, Microsoft is looking to its Activision purchase to continue to drive sales on the content side.

While Microsoft looks to be focusing increasingly on software sales and Game Pass as the key to its gaming business, with Activision only the largest of its recent publisher acquisitions, the company has still reaffirmed its commitment to the hardware business. Microsoft has a new digital-only Xbox Series X releasing in time for the holidays, and has also confirmed that it is working on the next generation of Xbox consoles.