Microsoft’s Xbox Brand Reports Record Growth Following Mass Layoffs

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All eyes have been on Microsoft and the Xbox brand this week after reports that it laid off 1,900 employees, including many at Activision Blizzard, following the completion of its acquisition. Then, just days later, Microsoft let go of more employees from its esports division, leaving approximately 12 people remaining on the team.

Despite this, Microsoft has just published its earnings report for Q2 2024 and has reported record numbers in its gaming division, which now includes revenue from Activision Blizzard for the first time in its report. For the first time, Microsoft Gaming and the Xbox brand has overtaken Windows and is now the third largest component of its business behind Microsoft Office and cloud-based services.

Microsoft has reported $62 billion in revenue with a net income of $21.9 billion during Q2 2023. This has put the company at a $3 trillion market value for the first time, although its shares are down 0.28% today, currently trading at $408.59 at the time of writing.

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Most of its products and services have grown year over year, with just its devices revenue down 9% as sales return to pre-pandemic levels. However, its largest growth has come from the Xbox brand, which has seen a staggering 61% growth year over year for its Xbox content and services revenue.

Microsoft CEO Satya Nadella reported that Xbox Game Pass saw a “record for the most subscriptions added on a single day ever” following the release of Starfield in September 2023. He also noted that the company has made great strides in cloud gaming and has seen a 44% increase in the number of hours players have streamed its titles in the past year.

Microsoft’s gaming division contributed $7.11 billion in revenue, making it the third-highest revenue source for the company, ahead of Windows, which generated $5.26 billion. However, this was vastly behind the $13.47 billion from Microsoft Office and cloud services and the $23.95 billion from its server products, which saw a 22% growth.

Microsoft CFO Amy Hood stated that she expects the gaming division to continue to grow following the acquisition of Activision Blizzard, which will come as a blow to many of the former employees who unexpectedly lost their jobs earlier this month despite adding $2 billion in revenue for the company.

Despite the continued growth of its content and services, estimated to be in the forties next quarter, Microsoft is expected to report a decline in console sales. Hood claimed this is due to the weaker console market, which only saw the brand grow 3% over the holiday period despite aggressive promotions and deals for its Xbox Series X console, with the PlayStation 5 currently outselling it at a 3 to 1 ratio.

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