Microsoft’s hardware revenue falls 22%, but software sales and services are on the up

The ever-decreasing cost of Xbox One consoles has caused Microsoft’s gaming revenue to fall by 3 per cent year-on-year, the company revealed in its Fiscal Q2 2017 report.

Xbox revenue reached $3.595bn in Microsoft’s fiscal Q2 2017 report, with the company stating that lower Xbox console pricing was the main cause for the fall in revenue. Indeed, hardware revenue fell by 22 per cent year-on-year, with Microsoft also noting a decline in the volume of consoles sold.

However, the good news is that software sales and services revenue are still growing. Together, these increased by 18 per cent year-on-year. According to Microsoft, this growth was driven by a higher volume of Xbox Live transactions and revenue per transaction.

Xbox software and services revenue grew 18 per cent with digital transactions reaching $1 billion this quarter from continued adoption of digital distribution and a strong game line-up," Microsoft said in its earnings call slides.

The company also revealed that its Xbox Live service now has 55m active users. In Q2 FY16, the number of active users was just 48m, showing a growth of 15 per cent.

Xbox Live monthly active users grew 15 per cent to a record 55 million, with growth across Xbox One, Windows 10, and mobile platforms," the slides read.

Indeed, yesterday SuperData’s report on the US digital market in December 2016 also saw a surge in digital growth, with the digital console market growing by 16 per cent year-on-year. The US retail console market, however, shrunk by 16 per cent year-on-year last month, making it the worst Holiday season in two decades.