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Xbox sales continue to pull down Microsoft's games biz revenue

Microsoft published its latest earnings report today, beating analyst expectations and reporting revenue growth in all of its divisions -- except the one which houses its Xbox games business.

Microsoft published its latest earnings report today, beating analyst expectations and reporting revenue growth in all of its divisions -- except the one which houses its Xbox games business.

Notably, Microsoft reports that in the quarter ending September 30th its games business revenue declined roughly 5 percent year-over-year to $1.9 billion, due primarily to declining revenue from sales of Xbox consoles. According to Microsoft, it could have been an even steeper drop in overall revenue if the decline in console sales hadn't been counter-balanced by rising revenues from Xbox services and software sales.

Since Microsoft made a public show last year of giving up on reporting console sales numbers, it's unclear how many Xbox One and One S units were sold during the quarter. In a conference call with investors, Microsoft chief Satya Nadella noted only that "for the past 3 consecutive months, Xbox One has been the number one selling console in the U.S.," adding that the Xbox Live userbase has grown 21 percent year-over-year.  

Looking to the future, Nadella predicted that "overall revenue will decline given lower price points and lower overall console units as mix shifts towards Xbox One and Xbox One S. We expect continued active engagement growth on our gaming platform given the holiday season."

This echoes the company's previous earnings report, which revealed Street-beating earnings overall but a decline in its games business due, again, to declining console sales.

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