Xbox gaming revenue is up 44%, but hardware sales continue to decline

Microsoft is heading towards an Xbox-free future, as hardware sales continue to decline.
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Microsoft’s financial results for the last quarter (the period ending 30 June 2024) have revealed significant growth in gaming revenue, but an equally significant drop in hardware sales for Xbox, indicating change on the horizon. Per a newly-released report, Xbox gaming revenue was up 44% year-on-year, as a direct result of Microsoft’s purchase of Activision Blizzard.

Notably, Xbox content and services revenue grew 61% in the same period, with the Activision Blizzard acquisition also contributing to this total. While unspecified, this could relate to Activision Blizzard games launching on the Xbox Game Pass subscription platform.

Despite this seemingly robust interest in Xbox-owned games and services, enthusiasm for Xbox hardware is falling rapidly, having declined 42% year-on-year. The statistic looks fairly shocking, although it’s not unexpected – it’s just a sign of the times.

The Xbox Series X and Series S consoles are now approaching maturity, after nearly four years in the sun. Many potential buyers are likely waiting for new developments, such as a mid-generation console refresh. We already know a new Xbox console is on the way, thanks to leaked documents, and it could be that folks are waiting for more news before committing to a new console. It’s also worth considering that Xbox has released fewer games this year, and while gaming revenue remains high, the stats have largely been inflated by existing Activision Blizzard games.

Read: New Xbox consoles and controller revealed by court documents

Perhaps most important to consider is that Microsoft has also recently been pushing for a cloud gaming-focussed future that’s untethered to consoles. The company remains enthusiastic about cloud gaming, and has recently expanded the scope of its services through Xbox Game Pass.

The Amazon Fire TV Stick is the latest device to be compatible with Xbox Cloud Gaming, and while this service still isn’t perfect, games are very well playable with a sturdy internet connection, and some patience. In the GamesHub review, we mentioned that solely using cloud gaming feels like a possible future – particularly when you can gain access to new games for around AUD $150, without the need for a console.

In that regard, it’s likely Microsoft isn’t overly concerned about drops in hardware revenue. While the Xbox Series X and Series S consoles continue to be supported, recent company messaging has focussed on a future where gaming is approachable and affordable for everyone, with any screen able to play games. Naturally, this would lead to fewer console purchases.

All that said, it does appear Microsoft is planning on launching a new Xbox console in the near future, and we may see hardware revenue grow with this potential release. According to leaked court documents, this console was targeting an October 2024 launch – and should that still be the case, we may hear more about it shortly.

Leah J. Williams is a gaming and entertainment journalist who's spent years writing about the games industry, her love for The Sims 2 on Nintendo DS and every piece of weird history she knows. You can find her tweeting @legenette most days.