REDMOND / LONDON (IT BOLTWISE) – Microsoft is facing a significant decline in Xbox console sales at the same time as the company is massively increasing its investment in artificial intelligence. Despite sales growth in other areas, the gaming division remains below expectations.
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Microsoft recently released its quarterly results showing a significant 30 percent decline in revenue from its Xbox hardware business compared to last year. This drop is notable because it does not yet reflect the impact of the console’s price increase, which only took effect in October. The price adjustment for the Game Pass Ultimate subscription, which took place in the same month, is also not included in these figures.
While Xbox content and services revenue remained stable, Microsoft saw growth in Xbox subscriptions and third-party content. However, this growth was partially offset by a decline in revenue from proprietary game development. The Xbox division was particularly affected when Microsoft began reducing its global workforce earlier this year. This led to the cancellation of several game projects, including a remake of the classic Perfect Dark and the long-awaited Everwild.
Despite the challenges in the gaming sector, Microsoft recorded overall revenue growth of 17 percent year-on-year, with operating profit increasing by 22 percent. CEO Satya Nadella emphasized the importance of the company’s AI investments in an earnings call. Microsoft plans to increase its AI capabilities by 80 percent this year and double its data center infrastructure.
The strategic realignment towards artificial intelligence could also have positive effects on the gaming division in the long term. The use of AI technologies could create new, immersive gaming experiences that have the potential to increase the appeal of the Xbox platform. However, analysts are divided on whether these investments can offset losses in the hardware business in the short term.
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