Microsoft’s latest financial report is in, with the quarter ending on 31st December featuring a massive 49% jump in Xbox and gaming revenue, set new records for monthly active users, and generally showed a great deal of improved value. The reason? Well, Microsoft is now including all of Activision Blizzard’s games as well.
Having completed the acquisition of Activision Blizzard King in October 2023, Microsoft is able to count the expectedly huge launch of Call of Duty: Modern Warfare 3, continued revenue for World of Warcraft, Diablo 4 and Overwatch 2, as well as the plethora of mobile gaming from Candy Crush maker King.
There was a massive jump in sales through the quarter ending on 31st December with gaming revenue up by 49% to $7.1 billion. 44% of that is down to Activision, so there was still a 5% year-on-year growth for everything else that Microsoft owns and produces in gaming.
“With our acquisition we have added hundreds of millions of gamers to our ecosystem, as we execute on our ambition to reach more gamers on more platforms,” said Microsoft CEO Satya Nadella in a comment during the earnings call.
You might be scratching your head how Microsoft can show such massive revenue while also trying to justify sweeping layoffs for around 1,900 people across its gaming business. The simple fact of the matter is that this happens with every major company merger or acquisition. It absolutely sucks for every single person affected, but Activision Blizzard brought around 17,000 more employees on top of Microsoft’s existing 5,000, and there’s bound to be huge overlaps and redundant jobs because of this.
However, this quarter was not just about Activision. Microsoft was able to show growth in a potentially key area without Activision games: streaming. Xbox cloud gaming has shown a year-over-year growth of 44% hours streamed, showing that there’s a growing appetite and acceptance of this as a viable way to get at Microsoft’s games.
Of course, the wrinkle here is that Microsoft had to sign away the streaming rights to Activision Blizzard games to Ubisoft in order to get the buyout past regulators. If they are able to feature Call of Duty games on Xbox Game Pass going forward (and with streaming), then it will be non-exclusive.
However, looking ahead maybe isn’t quite so rosy. Microsoft’s CFO Amy Hood said that, “In gaming, we expect revenue growth in the low 40s, including approximately 45 points of net impact from the Activision acquisition.”
However, “Hardware revenue will decline year-over-year,” which is indicative of the rough time that Xbox Series X|S is having when stacked up against PlayStation 5, and especially with Xbox consoles having had price increases last summer amid a cost of living squeeze.
Source: Microsoft
