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Xbox software and services revenue remains flat as hardware continues to slow

Microsoft's Q1 earnings report sheds some light on how the company's video game business is faring as a new console generation looms on the horizon.

Microsoft says that Xbox hardware revenue has fallen by 34 percent year-over-year but, unlike last quarter, Xbox content and services revenue remained unchanged from last year’s numbers.

According to the company’s Q1 2020 results, revenue for its video game business as a whole decreased 7 percent year-over-year to $2.5 billion, down $196 million from the $2.7 billion reported in Q1 2019.

The company said that a year-over-year decrease in how many Xbox consoles were sold during the quarter is primarily to blame for the downward shift. The same was notably true last quarter, though Q1’s hardware revenue decline is notably less sharp than Q4’s 48 percent fall.

On the software and services front, Xbox revenue remained mostly flat year-over-year. Minecraft had a strong showing this quarter, as did Gears of War 5 and Xbox Game Pass. Those three helped the segment stay toe-to-toe with the high revenue it saw last year, revenue Microsoft says was due to the then-success of an unnamed third-party title.

On a higher level, the More Personal Computing segment that contains the Xbox and Gaming businesses (along with Windows, devices, and search-related revenue) reported $11.1 billion for the quarter, up from $10.8 last year. Overall, Microsoft revenue is up year-over-year and came in at $33.1 billion for the quarter ending September 30.

Though previous reports have offered a closer look at monthly active users for services like Xbox Live and game revenue, this report marks the first since the company announced it would omit those figures and other information in favor of just disclosing the Xbox content and services revenue growth percentages listed above.

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