Things could be worse… but they could be much better too (Picture: Microsoft)

New financial results from Xbox sound positive at first, but there are continued signs of underperformance this generation.

Microsoft has shared its latest financial reports for both the final quarter of its 2023 fiscal year (which ended in June) and the year as a whole, and the results are interesting to say the least.

Just looking at the gaming side of things, CEO Satya Nadella speaks very positively in an earnings call, saying Xbox has set ‘new fourth quarter highs for monthly active users,’ as well as ‘record fourth quarter engagement across Game Pass.’

He doesn’t share any figures, though, only saying hours played are up 22% compared to last year. On top of that, while total gaming revenue is up compared to last quarter, it’s only a 1% increase to $36 million (about £28 million).

In addition, this growth has been offset by a decline in Xbox hardware revenue, which has dropped by 13%, as less people are buying Xbox consoles.

While all this is marginally better than the company’s dismal previous quarter, it’s not by much. This is especially true on the hardware front – revenue had already dipped by 30% last quarter and it clearly hasn’t recovered.

Industry analyst DomsPlaying put together a handy breakdown of these results, adding that the 1% increase in gaming revenue is still below Microsoft’s mid-single digit expectations.

The same can be said for its Xbox content and services only going up 5%, which Microsoft attributes to third party content and Game Pass.

However, DomsPlaying does conclude that this has been Xbox’s second-best quarter ever, with roughly $3.49 billion in sales (about £2.71 billion). 2023 has also been Xbox’s second-best fiscal year with roughly $15 billion (roughly £11 billion) in revenue… but that’s about $1 billion less than what it made in 2022.

Nadella remains optimistic about Xbox’s future, highlighting its summer showcase, the upcoming launches of Starfield and Xbox Game Pass Core, and the Activision Blizzard acquisition.

However, there’s bound to be a lot of stressful conversations happening behind closed doors. After the incredibly lacklustre 2022, 2023 was promised to be a big year for Xbox and yet it’s so far been anything but, not helped by a continued lack of major exclusives and Redfall’s underwhelming reception.

The fact that Microsoft remains cagey about sharing exact subscriber numbers also suggests that Game Pass is still not performing as strongly as expected.

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The service has missed its growth targets for the last two years and there are reports of subscriber numbers stalling.

This is partially why Microsoft is so eager to get its Activision Blizzard deal closed, since it can then start adding the company’s library of titles, like Call Of Duty, to Game Pass.

Whether or not this will boost subscriber numbers and profits enough to justify a $69 billion purchase remains to be seen.

No wonder Microsoft is so desperate to buy Activision Blizzard (Picture: Microsoft)

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New financial results from Xbox sound positive at first, but there are continued signs of underperformance this generation.