It wasn't unexpected: Year-on-year, Microsoft was able to achieve a year-on-year increase in sales from its gaming division in the third quarter. However, this success cost the Xbox company $68 billion.
Microsoft's Gaming sales were up compared to the previous year increase significantly. The company behind the Xbox points this out in its latest quarterly report. However, there is a reason for the massive boost, which cost the Redmond company many billions of US dollars.
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In fact, the record numbers belie a negative trend that would be on the balance sheet without the takeover of Activision Blizzard.
Microsoft's gaming revenue increased by 51 percent
During the third quarter of the 2024 fiscal year, Microsoft recorded an increase in gaming revenue of 51 percent or $1.8 billion compared to the same quarter of the previous year. This resulted in total sales of $5.45 billion.
With the growth, Microsoft achieved a record quarter in the gaming division, but primarily benefited from the takeover of the publisher Activision Blizzard including the mobile division King.
55 percentage points of the net effect can be attributed to the acquisition of the company behind “Call of Duty”. At the same time, this means that sales of gaming products that are not part of Activision Blizzard and King fell by several percent year-on-year.
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The acquisition also boosted pure revenue from Xbox content and services. Sales increased by 62 percent compared to the previous year, with 61 percent attributable to Activision Blizzard King sales. Without this effect, Xbox content and services would have achieved a minimal increase.
The situation becomes clear from pure hardware sales, which were less influenced by the takeover. Here, the prospect of exclusive games and the inclusion of Activision Blizzard titles in the Xbox Game Pass may have had a certain effect, driving buyers towards an Xbox console. But the numbers are ultimately disappointing. Hardware sales fell by 31 percent due to fewer consoles sold. As usual, the Redmond company did not reveal sales figures.
Was Activison Blizzard worth buying?
Whether the takeover of Activision Blizzard and King is a worthwhile deal for Microsoft will only become clear in the coming years. A company's sales are one of a number of key figures, but do not reflect profitability. The (not mentioned) profit is more relevant and the synergies – i.e. the side effects from the takeover – must also be taken into account.
Ultimately, not only did sales increase, but expenses within the gaming division also rose significantly with the takeover.
- Operating costs for the More Personal Computing division (which includes the gaming division) increased $1.3 billion, or 41 percent, in the most recent quarter compared to the previous year, as a result of the acquisition.
- Research and development spending increased by $669 million, an increase of 10 percent. Activision Blizzard was also the driving factor here.
- In addition, sales and marketing costs increased significantly as a result of the takeover. The same applies to general expenses and administrative costs.
Drastic measures were taken at the beginning of the year to reduce costs:
Quarterly boost will repeat
A similar situation with growing sales year-on-year was already recorded in the previous quarter and will also occur in the next two quarters.
Accordingly, Microsoft is forecasting gaming percentage growth in the low to mid-40s for the fourth quarter of the current fiscal year, driven by revenue from Activision Blizzard King content.
Growth in Xbox content and services revenue is also expected to be in the high 50s, with the acquired publisher seen as the driving force with a net impact of around 60 points. At the same time, Microsoft expects less revenue in the Xbox hardware business.
On the subject:
Less hardware sales and more software sales once again underline the approach that Microsoft is increasingly pursuing. With Activision Blizzard in its portfolio, the company has long been one of the largest multiplatform publishers. And Xbox game releases like “Sea of Thieves” or “Hi-Fi Rush” give an idea of where the journey will lead – despite vague hardware assurances.
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