Xbox hardware sales plunge 33% as Microsoft's consumer segment weakens
What's the story
Microsoft has reported a massive 33% drop in its Xbox hardware revenue, according to the company's latest earnings report. The decline is part of a broader trend affecting Microsoft's consumer-focused division, which also saw a 5% drop in Xbox content and services revenue. Despite these challenges, Microsoft's cloud and productivity businesses continue to thrive, contributing significantly to the company's overall revenue of $82.9 billion.
Leadership shakeup
Major leadership changes at Microsoft
The recent decline in Xbox revenue comes amid a major leadership shakeup at Microsoft. The company's Xbox chief CEO Phil Spencer has retired, while former Xbox president Sarah Bond has also left the company. This has left Asha Sharma, former head of Microsoft's CoreAI division, at the helm of the gaming giant. Sharma has already taken steps to revamp Xbox's identity and lowered the price of Xbox Game Pass.
Strategic shift
Microsoft CEO addresses changes during earnings call
Microsoft CEO Satya Nadella spoke about these changes during an earnings call. He said they are part of efforts to "win back fans" across all its brands, including Xbox. "The team is recommitting to our core fans and players and shaping the future of play," Nadella said. He also mentioned recent changes made to Windows, which have improved performance for lower memory devices and simplified the update experience.
AI focus
Cloud business booming for Microsoft
Despite the challenges in its consumer-focused division, Microsoft has doubled down on its AI efforts. The company's cloud business generated an impressive $54.5 billion in revenue, a 29% year-over-year (YoY) increase. "We are focused on delivering cloud and AI infrastructure and solutions that empower every business to eval-max their outcomes in the agentic computing era," Nadella said in a press release.
Productivity boost
AI-driven productivity suite sees surge in paid seats
Microsoft's AI-driven productivity suite, Microsoft 365 Copilot, also saw a surge in paid seats from 15 million last quarter to 20 million. The company has been adding new AI features to its productivity suite, including "vibe working" capabilities across Excel, Word, and PowerPoint. During this quarter, Microsoft said its consumer cloud revenue for Microsoft 365 grew by an impressive 33%, while the commercial segment saw a healthy increase of 19%.