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Xbox gaming revenue fell 7% during MSFT Q4 2022 despite Game Pass growth

While Xbox gaming revenue has fallen, it's not necessarily because of Xbox Game Pass.

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While the good times have been rolling for Xbox from a content standpoint, Microsoft's gaming division hasn't quite hit its financial goals. As part of the tech giant's Q4 2022 earnings, gaming revenue has fallen by $259 million (7%) due to a decrease in sales on Xbox hardware and content.

As noted on the Microsoft Q4 2022 earnings report, Xbox's gaming revenue has taken a specific dip in hardware sales. Revenue on that end has fallen by 11 percent, as sales of the Xbox Series X and S appear to have slowed. On top of that, content and services revenue is down by 6 percent due to lower engagement hours and lackluster monetization across both first and third-party titles.

One might expect the takeaway to be that Xbox's Game Pass service has underperformed, but that does not appear to be the case. The Q2 2022 earnings report makes a point to note that Game Pass has grown and has helped to offset the gaming division's losses. However, this may prove to be a double-edged sword, as a massive Game Pass library doesn't leave much incentive to spend money... well... anywhere in the Xbox sphere, really. Anecdotally speaking, it's easier to bounce around from Game Pass title to Game Pass title than to stick to one and drop money on cosmetics or DLC.

Microsoft (MSFT) shares are down after Q4 2022 earnings report
Microsoft (MSFT) shares have rebounded in after hours trading.
Source: Yahoo! Finance

Microsoft shares dropped by $6.93 (2.68%) at the close of the market on Tuesday. The company has made up those losses and made a slight gain in after hours trading, according to Yahoo! Finance.

Whether Microsoft will make any response to these losses or stay the course remains to be seen. After all, the frantic search for next-gen hardware appears to have slowed, as is natural at this point in a console's life cycle, which may prove to be the largest contributor to the gaming division's losses. We'll keep an eye on this and other stories in the finance sector of the tech and gaming world. We'll be listening to Microsoft's Q4 2022 earnings call, which you can listen to live on the Shacknews Twitch channel.

Senior Editor

Ozzie has been playing video games since picking up his first NES controller at age 5. He has been into games ever since, only briefly stepping away during his college years. But he was pulled back in after spending years in QA circles for both THQ and Activision, mostly spending time helping to push forward the Guitar Hero series at its peak. Ozzie has become a big fan of platformers, puzzle games, shooters, and RPGs, just to name a few genres, but he’s also a huge sucker for anything with a good, compelling narrative behind it. Because what are video games if you can't enjoy a good story with a fresh Cherry Coke?

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