Xbox Hardware Sales Plummet 29% Amid Record-Breaking Game Pass Growth

Microsoft's Q2 financial report reveals a 7% decline in overall gaming revenue, with a significant 29% drop in hardware sales. For the quarter ending December 31, 2024, key figures include: $69.6 billion in revenue (up 12% year-over-year), $14.7 billion in More Personal Computing revenue (including Xbox), $31.7 billion in operating income (up 10% year-over-year), and $24.1 billion in net income (up 10% year-over-year). Despite the gaming segment's decline, Xbox content and services saw a 2% increase, driven by strong performance from Activision Blizzard content, such as the launch of Call of Duty Black Ops 6. Microsoft's Cloud services generated $40.9 billion (up 21% year-over-year), while its AI business experienced a 175% year-over-year increase, surpassing $13 billion in annual revenue. The Xbox Game Pass achieved a new quarterly revenue record, with its PC subscriber base growing over 30%. Additionally, 140 million hours were streamed on Xbox Cloud Gaming, and Indiana Jones and the Great Circle has been played by over four million people since its December 9, 2024 launch. Microsoft CEO Satya Nadella noted that the company is delivering its plan to improve the gaming business's profitability by offering higher-margin content and platform services. Looking ahead, Microsoft expects Xbox content and services revenue to rise in the low to mid-single digits for Q3, driven by first-party content and Xbox Game Pass, while hardware revenue is expected to decline year-over-year.