Microsoft praises Xbox Game Pass as quarterly subscription revenue nears $1 billion

It wasn't all sunshine and roses, however, with hardware revenue declining by 30 percent year-on-year.

Xbox Game Pass appears to be the main growth driver within Microsoft's video game business.

According to the company's fiscal report for the third quarter ended March 31, 2023, gaming revenue declined by 4 percent year-on-year, with Xbox hardware revenue also falling by 30 percent over that same period.

Despite those downturns, Microsoft said that Xbox content and services revenue grew by 3 percent "driven by growth in Xbox Game Pass."

Notably, Microsoft CEO Satya Nadella said the company set third quarter records for monthly active users and monthly active devices within its gaming division, adding that it's "rapidly executing on our ambition to be the first choice for people to play great games whenever, however, and wherever they want."

Although Nadella didn't name-drop Xbox Game Pass specifically, when discussing the company's gaming business he also noted that "revenue from subscriptions reached nearly $1 billion this quarter."

The Xbox Game Pass market

"This quarter, we also brought PC Game Pass to 40 new countries, nearly doubling the number of markets we’re available," he added during an earnings conference call. "Great content remains the flywheel behind our growth. We have now surpassed 500 million lifetime unique users across our first party titles."

Providing more context, Microsoft CFO Amy Hood said declining Xbox hardware revenue was partly due to the fact that last year benefitted from "increased console supply." She also pointed out that Xbox content and services revenue increased due to "better-than-expected monetization in third-party and first-party content," as well as the performance of Xbox Game Pass.

Offering up more numbers, Microsoft said that revenue within its More Personal Computing division–which houses its Xbox business–fell by 9 percent to $13.3 billion.  Across the company as a whole, revenue increased by 7 percent year-on-year to $52.9 billion and operating income rose by 10 percent to $22.4 billion.

Commenting briefly on the Microsoft's ongoing merger with Activision Blizzard, Nadella said the company is still working to closing the deal in the current fiscal year, subject to gaining regulatory approval.

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