Xbox console sales are down as services take over

By Carli Velocci Published July 31, 2024

The Xbox Series X and Xbox Series S getting splashed with water. — Microsoft

While Xbox continues to grow its software and content business thanks to the Activision Blizzard acquisition, the hardware side isn’t doing quite as well. That’s according to Microsoft’s fourth-quarter financial report released Tuesday, which revealed that Xbox’s hardware revenue dropped by 42% compared to this time last year. It didn’t reveal exact numbers, but hardware was down 13% in its fourth-quarter 2023 financials compared to the previous year.

Hardware’s downward trend isn’t as big a deal when the company has been all in on expanding its other services, like Xbox Game Pass and Cloud Gaming. Microsoft CEO Satya Nadella highlighted in the earnings call that Xbox’s expansion to other platforms like Amazon TV is a part of the strategy to “expand from there so that we have content for everywhere people play games, starting with the PC.” In general, revenue from content and services increased by 61%, boosted by the Activision Blizzard acquisition.

Recommended Videos

Xbox also profited from the Fallout show on Amazon Prime, which it said was the “second-most-watched title” on the service ever. This led to an increase in people playing the Fallout franchise on Game Pass. Nadella said that there are now 500 million active monthly users across the company’s platform and services.

Nadella added that the company expects overall Xbox revenue to continue its upward trajectory thanks to Activision Blizzard’s portfolio, which can help Xbox break into mobile and continue expanding on PC. However, hardware will continue to drop.

Console sales are generally down across the board. According to Circana analyst Mat Piscatella, hardware and accessory spending fell 6% in May 2024 year over year, although overall spending in 2024 was slightly up. He added that Switch sales in May 2023 were boosted by The Legend of Zelda: Tears of the Kingdom, so that skews the numbers slightly.

We’re also in the middle of the life cycle for the Xbox Series X and S. The consoles came out at the tail end of 2020, and previously, Xbox has released a mid-gen refresh. Last generation, that was the Xbox One S and Xbox One X; the former was a smaller version of the Xbox One, while the latter was an upgrade in terms of performance.

Former Contributor, Games

Carli is a technology, culture, and games editor and journalist. They were the Gaming Lead and Copy Chief at Windows Central…

Topics

Gaming

Intel’s Arc G3 Extreme could be the plot twist handheld gaming needed

My time with the MSI Claw and Acer Predator Atlas suggests AMD finally has genuine competition.

Intel Arc G3 Extreme Hands On with Acer Predator Atlas 8

If there’s one gadget category I’ve spent an unhealthy amount of time obsessing over in the past few years, it’s handheld gaming PCs. I’ve put hundreds of hours into the Steam Deck, bought an original ROG Ally for myself, and most recently reviewed the ROG Xbox Ally X in depth. I’ve seen this market evolve from a cool experiment into something that can genuinely replace a gaming laptop for quick sessions on the couch or while travelling. I’ve also experienced its biggest weakness firsthand. No matter how good these machines get, there’s always some compromise lurking around the corner, whether it’s battery life, thermals, performance, or software quirks.

So when I landed at Computex 2026 and got the chance to spend time with Acer’s brand-new Predator Atlas 8 and MSI’s latest Claw 8 EX AI+, I was naturally excited. Not just because they looked cool, but because they represented something the handheld market desperately needed: real competition. Truth be told, Intel’s new Arc G3 Extreme processor might just be the most important handheld announcement we’ve seen in years. And honestly? It’s about time.

Gaming

Xbox’s next era may start with a painful question about console prices

A new Xbox Wire post points to surging parts costs, tighter supply, and more pressure on future console pricing.

Xbox is putting unusual pressure on its own console business, and a new Xbox Wire post gives players a clear reason to watch for an Xbox price hike.

Microsoft says storage and memory prices are climbing fast, while Xbox can’t currently make as many consoles as players want to buy. It also says the business needs a new hardware model and new partnerships as it remains committed to Helix.

Gaming

Steam is ending gift cards because scammers were raising too much hell

Digital gift cards will remain, but physical cards are being retired from stores

Steam gift cards.

Valve is pulling physical Steam gift cards from retail stores, bringing an end to a program that has been around since 2012. The company confirmed, as spotted via SteamDB, that it will no longer send new stock of Steam gift cards to retailers once current supplies run out.

Digital Steam gift cards are not going away. Valve says users will still be able to buy them directly through Steam, and existing physical cards can still be redeemed whenever users choose. Retail stock, however, is expected to disappear by the end of 2026.