Microsoft Q4 2021 Fiscal Earnings

Obviously there is a lot to Microsoft’s Earrings report including Windows products, Azure cloud based products and search advertising revenue, which was up $737 million this quarter. What we are going to try to drill into and examine is the gaming related data and overall it seems good with a few minor blemishes but nothing of major concern.

For starters, overall gaming revenue increased $357 million or 11% driven by Xbox Hardware as you would expect with the launch of new consoles. Diving a little deeper we can see that Xbox hardware revenue saw an increase of 172% which was in large part due to the two new consoles that Microsoft now has to offer at their much higher price points than the Xbox One.

The minor blemish is that Xbox content and revenue decreased $128 million or 4% which isn’t that much but these are not the numbers you want to see when Xbox and their major plan for the future is based around the service known as Game Pass. However, Microsoft goes on to explain that the reason for the drop in content and services was due to a decline in third party titles as well as being compared to a year that saw the start of the pandemic when many were staying at home and rekindling their love of gaming.

The good news is that Microsoft did state that this decline was largely offset from the success and growth of Game Pass and first party titles.

Satya Nadella, Microsoft CEO, had a few words to add in the earnings call afterwards including that the Xbox Series X|S are now the companies “fastest selling consoles ever, with more consoles sold life to date than any previous generation” In a similar boat to Sony, Nadella stated that demand for the new consoles continues to exceed supply”

As has now been the standard since the early days of the Xbox One, Microsoft no longer shares concrete sales figures as it serves no purpose for the company. Microsoft can still be extremely profitable and successful being the second place console, especially with the services such as Game Pass that they now offer.

Well known games industry analyst, Daniel Ahmad took to twitter with the assumption that sales for Micorsofts latest generation of Xbox is somewhere around 6.5 million which up from the 5.7 million for the Xbox One and the 5 million for the Xbox 360. Microsoft might also be gaining momentum as in the NPD report for June, Xbox was the best selling console in terms of dollar sales, which is a great sign for the company.

Using the same calculations in estimating where the PS5 sales figures might end up if they continued on the same trajectory, we can estimate where the Xbox might end up moving on this continued path. Assuming that the lifespan of the consoles remains the same then it will be around 96 months from launch before the next iteration releases. Xbox is currently selling around 812 000 consoles monthly which works out to around 78 million consoles sold.

Putting that number into perspective Microsoft best selling system to date has been the Xbox 360 which sold around 84 million. The Xbox One has an estimate of around 51 million and the original Xbox sold around 24 million. You also have to assume that once supply chain issues are cleared up and supply is able to match demand sales can improve. Not to mention how much more appealing Game Pass will be when there are more first party titles available including the upcoming Halo Infinte which is going to be free to play which will likely sell a lot of systems as well as many of the future Bethesda titles, which will likely be exclusive to Xbox.

Xbox has been on this path for a while but taking all of the lessons that the company learned during the last generation, there is very strong chance that this generation becomes the highest selling for the company to date. Xbox One also got off to a better start than the Xbox 360, which means that nothing is guaranteed but how it looks from the outside, Microsoft is going to be in good shape.