Xbox content and services revenue increased by 61 percent at Microsoft during Q2, largely driven by the Activision Blizzard merger.
Overall, gaming revenue increased by 49 percent to $7.11 billion, with 44 points of net impact from the Activision Blizzard acquisition, to become the third-most lucrative product offering for Microsoft (behind Server and Office). Microsoft CFO Amy Hood suggested that growth matched expectations.
“Total gaming revenue was in line with expectations as stronger-than-expected performance from Activision was offset by the weaker-than-expected console market noted earlier,” she added.
Microsoft shared its latest financial results less than a week after laying off 1,900 workers across its game studios. The sweeping job cuts were barely mentioned in the litany of documents Microsoft produced to round off the second quarter, outside of a brief mention of “last week’s announcement” that estimated how much the restructuring plan might cost.
Since completing the acquisition in October 2023, the deal has added over $2.1 billion in revenue and an operating loss of $437 million to Microsoft’s balance sheets. Microsoft noted the “change of Activision Blizzard content from third-party to first-party” is reflected in those numbers.
Microsoft CEO invigorated by Xbox release slate and cloud gaming prospects
Drilling down further, Xbox hardware revenue increased by 3 percent year-on-year. Microsoft also set all-time records for monthly active users on Xbox, PC, and mobile during the quarter, although those figures were “inclusive of Activision Blizzard King.”
Waxing lyrical about the state of Microsoft’s video game operations during an earnings call, CEO Satya Nadella said the company has added “hundreds of millions of gamers” to its ecosystem through its colossal Activision Blizzard merger and indicated there was cause to be optimistic in other business areas, including cloud gaming.
“With cloud gaming, we continue to innovate to offer players more ways to experience the games they love, where, when, and how they want. Hours streamed increased 44 percent year-over-year,” he said. “Great content is key to our growth, and across our portfolio, I’ve never been more excited about our lineup of upcoming games.”
It was also fascinating to hear Nadella describe Call of Duty as one of Microsoft’s most “durable” franchises and position Activision Blizzard’s shooter alongside the likes of Elder Scrolls Online and Starfield.
Looking towards Q3, CFO Amy Hood said Microsoft expects Xbox content and services revenue growth in the low-to-mid-50s, again driven largely by the Activision Blizzard merger. She also anticipates hardware revenue to decline year-over-year.