After a few years of proud increases in gaming revenue thanks to Xbox Series X and S sales, Microsoft’s gaming segment finally seems to be slowing down a bit. And while a drop is expected, the lack of major first-party game releases isn’t exactly helping things.
The company released its second-quarter earnings today, and for the first time in a while, Xbox posted a year-over-year decline. Game revenue was down 13% year-over-year, and hardware revenue specifically was down the same. Overall Xbox content and services revenue fell 12%, with Microsoft attributing the decline to a few factors: decreased spending on first-party content, lower monetization on third-party content, and a strong comparable prior year.
What this essentially means is that Xbox didn’t have such a strong lineup of its own to spend last holiday, but also, 2021 was always going to be hard to beat. In software, Xbox had Halo Infinite, and in hardware, the Series X and S were sailing with high demand combined with increased supply as supply chain restrictions began to ease.
So while the Xbox dip is a reversal from recent patterns, it’s predictable and relatively small, putting Microsoft’s gaming division at roughly the same revenue levels it was seeing in 2020-2021. And Game Pass subscriptions, Xbox says, continue to grow.
What’s more troubling is what has happened since then: Last week, Microsoft laid off 10,000 employees, including several employees at The Coalition, 343 Industries, and Bethesda. While it’s ostensibly billed as a cost-cutting measure in light of slowing consumer spending and the ongoing recession, we’ve yet to know how those cuts will affect future game production within Xbox, and it’s not yet. clear which teams and games were affected.
Microsoft’s gaming and Xbox segments are part of the most personal computing division, which had $14.2 billion in revenue, down 19% due to declines in several segments, including gaming. Overall, Microsoft generated $52.7 billion in revenue, up 2% year-over-year.
We’ll be listening to Microsoft’s earnings call later today and will update this story with more information.
Rebekah Valentine is a news reporter for IGN. You can find her on Twitter @patovalentine.