Microsoft hardware revenue down by 28% year-on-year

Despite year-on-year increases in overall income and revenue, Microsoft’s gaming segment has experienced revenue drops as the Xbox One’s life cycle comes to a close.

Microsoft reported revenue of $33.7 billion for Q4, which is up 12 percent year-on-year. Net income was also up year-on-year at $13.2 billion, an increase of 49 percent. In addition, operating income was up by 12 percent year-on-year at $12.4 billion.

Revenue for the More Personal Computing Segment, which includes Microsoft’s gaming segment, was up by 4 percent year-on-year at $11.3 billion. However, gaming revenue itself has dropped by 10 percent year-on-year to $2 billion. Xbox service and software revenue was also down year-on-year, experiencing a drop of 3 percent.

By far the biggest drop in revenue for Microsoft’s gaming segment was Xbox hardware, which saw a year-on-year decrease in revenue of 49 percent. This is due to the announcement of Project Scarlett, the next generation in Microsoft gaming hardware, which has highlighted the end of the line for the Xbox One’s life cycle.

Outside of this drop in hardware sales, Xbox subscriptions are performing rather well. The monthly active users for Xbox Live have increased by 14 percent year-on-year for Q4, bringing the total to 65 million.

Microsoft has reported revenue for the full-year at $126 billion, an increase of 14 percent year-on-year. Net income saw a huge boost of 137 percent to $39.2 billion, and operating income is up to $43 billion, an increase of 23 percent.

Microsoft’s full-year revenue for the gaming segment looks far better than Q4 revenue. The More Personal Computing segments full-year revenue totalled $46 billion, with gaming contributing $11.4 billion of that figure. This is an increase of 10 percent year-on-year, which is impressive considering that Xbox hardware sales are falling.

It’s interesting that Microsoft’s gaming segment continues to grow in spite of the drop in hardware sales. This is likely due to the introduction of the Xbox Game Pass Ultimate, and PC access to the Xbox Game Pass subscriptions. As the industry grows to offer more subscription services like this, other platform holders could see a similar trend in quarterly and full-year revenue results.