Microsoft’s Xbox business took a hit in the most recent quarter as the company prepares to debut its new Xbox Series X console this holiday season.
Gaming revenue was down 21 percent year-over-year to $3.4 billion. Xbox content and services revenue sunk 11 percent to $2.4 billion, according to the company’s earnings report for the December holiday quarter. Both metrics were in line with expectations.
Microsoft said the content and services revenue was down “against a high prior year comparable, primarily from a third-party title,” a.k.a. the success of blockbuster multiplayer game Fortnite. The drop was partially offset by subscriptions growth with services such as Xbox Game Pass and Xbox Live Gold.
Microsoft CEO Satya Nadella said today that the company set a new record for Xbox Live monthly active users during the quarter. Xbox Game Pass subscribers more than doubled.
Slowing Xbox One console sales — hardware revenue decreased 43 percent — are hurting Microsoft’s bottom line, but that should change later this year as the company plans to release the Xbox Series X console.
Also on the horizon is Microsoft’s Project xCloud technology, which entered testing last year and allows users to stream their games from Microsoft’s servers on almost any compatible connected device. xCloud will be coming to Windows 10 as well as the Xbox platform.
Microsoft posted revenue of $36.9 billion for the December quarter, up 14%, and surpassed Wall Street’s profit expectations with earnings per share of $1.51.