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[Gudji]

party animal ...................no more

 

[SlimySnake]

Need to compare with the competition but on a first glance, gamepass up but everything down significantly? What happened to GP boosts software sales?

Software sales are down across the board, but their competition PS5 sold more units this year than it did in 2021.

 

[StreetsofBeige]

Another great quarter. Over $16 billion profit. Gaming sunk, but thats the nature of a lot of tech after a few years of easy sales during covid as people were at home more often.

FY23 Q2 - Press Releases - Investor Relations - Microsoft

Earnings Release FY23 Q2

• · Revenue was $52.7 billion and increased 2%
• · Operating income was $20.4 billion GAAP and $21.6 billion non-GAAP, and decreased 8% and 3%, respectively
• · Net income was $16.4 billion GAAP and $17.4 billion non-GAAP, and decreased 12% and 7%, respectively
• · Diluted earnings per share was $2.20 GAAP and $2.32 non-GAAP, and decreased 11% and 6%, respectively

“The next major wave of computing is being born, as the Microsoft Cloud turns the world’s most advanced AI models into a new computing platform,” said Satya Nadella, chairman and chief executive officer of Microsoft. “We are committed to helping our customers use our platforms and tools to do more with less today and innovate for the future in the new era of AI.”

“We are focused on operational excellence as we continue to invest to drive growth. Microsoft Cloud revenue was $27.1 billion, up 22% (up 29% in constant currency) year-over-year as our commercial offerings continue to drive value for our customers,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

 

[Go_Ly_Dow]

If Starfield is a mess then Xbox will likely lose more ground to Sony/Nintendo.

 

[Spitfire098]

I thought gamepass leads to more sales?

 

[H-I-M]

Hardware sales already down, 2 years into the Gen and with the Series S available and discounted constantly?

I don't get it.

 

[Del_X]

Hardware down despite price cuts on the Series S... yeah that's how it works? It's revenue.

Poor MSFT only up 4.26% after hours. How will they ever recover?

 

[Poltz]

 

[kazuyamishima]

First Party decline was expected, but third party?

The Xbox Series baseline is increasing.

Also, can we expect any numbers from MS again or November 2014 will be the last time MS revealed numbers??

 

[Three]

Really disappointing results in all the gaming related aspects.
The sales failure of the super discounted Series S during the holiday season and the declining revenues in services (Gamepass) are especially concerning for them.
It's basically the whole "value" focused part of their strategy failing.
The other part is about boosting contents through acquisitions and here who knows how the whole Activision drama will end.

I believe gamepass was up but content was down. Could be wrong though.

 

[Pelta88]

The really alarming thing here is how early into the generation we are and how quickly the XBOX console sales are falling, despite the deep price cuts.

 

[baphomet]

Everything gaming down?

In a year without a single AAA first party game?

Fucking no way!?!

 

[thicc_girls_are_teh_best]

Another great quarter. Over $16 billion profit. Gaming sunk, but thats the nature of a lot of tech after a few years of easy sales during covid as people were at home more often.

FY23 Q2 - Press Releases - Investor Relations - Microsoft

Earnings Release FY23 Q2

• · Revenue was $52.7 billion and increased 2%
• · Operating income was $20.4 billion GAAP and $21.6 billion non-GAAP, and decreased 8% and 3%, respectively
• · Net income was $16.4 billion GAAP and $17.4 billion non-GAAP, and decreased 12% and 7%, respectively
• · Diluted earnings per share was $2.20 GAAP and $2.32 non-GAAP, and decreased 11% and 6%, respectively

“The next major wave of computing is being born, as the Microsoft Cloud turns the world’s most advanced AI models into a new computing platform,” said Satya Nadella, chairman and chief executive officer of Microsoft. “We are committed to helping our customers use our platforms and tools to do more with less today and innovate for the future in the new era of AI.”

“We are focused on operational excellence as we continue to invest to drive growth. Microsoft Cloud revenue was $27.1 billion, up 22% (up 29% in constant currency) year-over-year as our commercial offerings continue to drive value for our customers,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

I mean their Azure & Office offerings are pulling heavy duty. Windows is doing okay, it seems.

But c'mon, most of us only really care about Xbox here and for that division, results were quite bad. More than some of us even could've predicted, I'd say.

I believe gamepass was up but content was down. Could be wrong though.

It was but, Game Pass being "up" doesn't really mean anything. For starters they are probably referring to PC Game Pass, and any growth there is going to look massive percentage-wise because they barely had much subscribers there even this time last year.

It also doesn't say much about what contributions to revenue it accounted for, because there are so many ways to cheap out on the typical ARPU for Game Pass via $1 conversion deals, free trials, MS Reward points, etc.

 

[Mownoc]

Hardware down despite price cuts on the Series S... yeah that's how it works? It's revenue.

Except MS say hardware was down in terms of volume as well. So yes even with a heavily discounted series S and better stock than 2021 they sold less units.

 

[Ronin_7]

Xbox being alive is a miracle. Kudos to MS for that lmao

Absolute disastrous.

 

[reksveks]

I believe gamepass was up but content was down. Could be wrong though.

Yep, content and services is a single segment.

Morre than some of us even could've predicted, I'd say.

They were in line with MS's forecasts so maybe some of us were just off.

Software sales are down across the board, but their competition PS5 sold more units this year than it did in 2021.

Had this same conversation in previous earning calls, only for Sony to show similar declines in software revenue. Unfortunately the some on the forum doesn't learn. Think we need to see where this content and service decline ends up in comparison to the industry.

 

[Luminoth-4545]

The 13% decline is the from the same Oct to Dec quarter one year ago isn't it? That is bad considering production was limited due to component shortages in 2021 and you would expect an increase in sales now that they can produce more.

EDIT: Realised hardware is revenue based so the unit decline could be less than 13% due to the cheap deals for the Series S over the holiday and the Series S possibly being a higher percentage of total XBS sales. Last year was 4.4 milion for the holiday quarter so a 13% decline would be 3.83 million but probably around 4 million or marginally more due to the aforementioned reasons, either way these numbers are not good.

 

[IntentionalPun]

Less people bought consoles, and more of them bought Series S than X than previous year, most likely.

Not a good year for Xbox financially it seems... that "partially offset by Gamepass subs" thing isn't exactly some great news.. eventually they may find a real causation between GP subs going up, and revenue going down.

2023 truly is going to be a huge year for XBox at Microsoft.. I have a feeling if they don't have a great year the pocket books might not be so open.

Of course if the buyout goes through we'll instantly see their revenue balloon either way.

 

[Elios83]

I believe gamepass was up but content was down. Could be wrong though.

No you're right, I read that content/services is down and since that includes Gamepass I thought that was down as well.
In any case the situation is not good at all.

 

[MatrixReloaded101]

When you consider how bad game pass has been with adding new good games being down by only 13% isn’t bad at all.

 

[GHG]

It's basically the whole "value" focused part of their strategy failing.

No significant new game releases and specifically targeting customers who don't have buying power will do that to you.

 

[thicc_girls_are_teh_best]

Yep, content and services is a single segment.


They were in line with MS's forecasts so maybe some of us were just off.

I thought for FY 2023 Q2 they expected to stay relatively flat YoY? Did they revise that forecast?

Less people bought consoles, and more of them bought Series S than X than previous year, most likely.

Not a good year for Xbox financially it seems... that "partially offset by Gamepass subs" thing isn't exactly some great news.. eventually they may find a real causation between GP subs going up, and revenue going down.

Don't forget, Phil Spencer said Game Pass on console had "stagnated" and that most of their growth was coming from PC. But considering PC Game Pass was already so much less than on Xbox to begin with, something like 159% growth or whatnot probably isn't that much in absolute numbers as it'd seem to sound.

Of course if the buyout goes through we'll instantly see their revenue balloon either way.

Yeah, there is that. Saw a similar thing play out when Zenimax acquisition was officiated and their revenue got rolled into Xbox's.

But it's rather worrying if the only way a company can increase their gaming revenue is through buying up other gaming publishers and assimilating their revenue into their console division's. That ultimately is not a sustainable long-term growth option.

 

[Neo_game]

I do not think you can blame the Chairman and CEO. May be he needs to review Phil Spencer performance. But I have a feeling he likes him

 

[Coloress_Kafka]

Microsoft did price promotions on the wrong console, a drop on the Xbox Series X would have went for Sony’s neck especially when they were raising prices due to inflation.

 

[TheThreadsThatBindUs]

what does cc mean?

Crooked Cunt

 

[Three]

It also doesn't say much about what contributions to revenue it accounted for, because there are so many ways to cheap out on the typical ARPU for Game Pass via $1 conversion deals, free trials, MS Reward points, etc.

I think everything reported is revenue so free trials and MS rewards wouldn't matter. It's not just subscriber numbers that's up. All we know is that an increase in gamepass revenue is slightly offsetting a bigger decline in content revenue to still result in an overall revenue decline in content and services.

 

[marjo]

Really disappointing results in all the gaming related aspects.
The sales failure of the super discounted Series S during the holiday season and the declining revenues in services (Gamepass) are especially concerning for them.
It's basically the whole "value" focused part of their strategy failing.
The other part is about boosting contents through acquisitions and here who knows how the whole Activision drama will end.

Game Pass revenue was up. Look at the slide in the OP.

 

[Kacho]

First Party decline was expected, but third party?

What major third party games dropped in Q4 besides the usual stuff? Callisto Protocol was a bomb. Midnight Suns and NFS likely underperformed. No big Ubisoft game like we usually get. Sales for Gotham Knights and Saints Row dropped off a cliff. Awful, awful year for third party software.

 

[H-I-M]

Microsoft did price promotions on the wrong console, a drop on the Xbox Series X would have went for Sony’s neck especially when they were raising prices due to inflation.

That's not really how it works.
If they could, they would have.

 

[R3claimer117]

lol at some people in here discussing a 2 trillion dollar company like they’re on their death bed cause their smallest division was down. I mean it’s expected there was no first party release all year except smaller games like grounded and pentiment.

 

[SportsFan581]

Lack of first-party content certainly hurt 2022 on multiple levels, 2023 should be more competitive there.

 

[balls of snow]

The kick in the nuts Phil needs to ship some games one can only hope.

 

[reksveks]

thought for FY 2023 Q2 they expected to stay relatively flat YoY? Did they revise that forecast?

From the October 25th call

https://www.microsoft.com/en-us/Investor/events/FY-2023/earnings-fy-2023-q1.aspx

In Windows OEM we expect revenue to decline in the high 30s. Excluding the impact from the Windows 11 revenue deferral last year, revenue would decline mid-30s reflecting both PC market demand and a strong prior year comparable, particularly in the commercial segment.

In Devices, revenue should decline approximately 30 percent, again roughly in line with the PC market.

In Windows commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive growth in the mid-single digits or low double digits in constant currency.

Search and news advertising ex-TAC should grow in the low-to-mid teens, roughly 6 points faster than overall Search and news advertising revenue, driven by growing first party revenue and the inclusion of Xandr.

And in Gaming, we expect revenue to decline in the low-to-mid teens against a strong prior year comparable that included several first-party title launches, partially offset by growth in Xbox Game Pass subscribers. We expect Xbox content and services revenue to decline in the low-to-mid-teens.

 

[Ronin_7]

lol at some people in here discussing a 2 trillion dollar company like they’re on their death bed cause their smallest division was down. I mean it’s expected there was no first party release all year except smaller games like grounded and pentiment.

Microsoft isn't charity, Xbox needs to perform.

 

[feynoob]

lol at some people in here discussing a 2 trillion dollar company like they’re on their death bed cause their smallest division was down. I mean it’s expected there was no first party release all year except smaller games like grounded and pentiment.

That is not an excuse.

 

[feynoob]

Microsoft isn't charity, Xbox needs to perform.

If Xbox doesnt perform very well in the future, they will get the axe.

 

[R3claimer117]

Microsoft isn't charity, Xbox needs to perform.

This isn’t affecting them in the least bit some are just using this to push Microsoft get rid of Xbox agenda nothing more. The division was performing fine when they had software to release I’m sure it will recover as the year goes on when they’re putting out games. To act like it’s the end times is absurd.

 

[R3claimer117]

If Xbox doesnt perform very well in the future, they will get the axe.

Lol spending 70 billion dollars to axe something is one way good analysis there.

 

[Ronin_7]

If Xbox doesnt perform very well in the future, they will get the axe.

I don't think because it's just to many studios to close... Would be really bad.

 

[feynoob]

Lol spending 70 billion dollars to axe something is one way good analysis there.

If that deal gets approved, Xbox might survive.
If that deal fails, MS would need Xbox to pull its own legs. If it continues this trajectory, then the axe would do its job.

 

[StreetsofBeige]

Microsoft isn't charity, Xbox needs to perform.

Xbox has never been a big performer for MS in 20 years. Out of all the key product lines and pillars, it's got to be the worst one out there compared to cloud, windows, MS Office, server stuff etc...

But it's still around.

 

[feynoob]

I don't think because it's just to many studios to close... Would be really bad.

It might be harsh, but that is the direction they will go, if Xbox doesnt change its future.

Investors wont sit down with a losing business.

 

[leo-j]

They have purchased and invested billions into Xbox and Bethesda/ACTIVISION so Xbox as a hardware may vanish but gamepass and the 3rd party content may remain

 

[reksveks]

Investors wont sit down with a losing business.

honestly it partially depends on the strength of the CEO, Nadella is currently pretty secure but obviously that may change and definitely there is no guarantee the next ceo will see the same value in gaming as Nadella does.

 

[chonga]

Game Pass revenue was up. Look at the slide in the OP.

Here is the problem. If you bring out a product that displaces another then you must at the very least replace the revenue you displace, and ultimately you aim really is to gain extra.

Additionally the benefit and idea of things like service titles and Game Pass is to avoid the peaks and troughs of figures from hit titles. Instead you're aiming for a more steady flow of cash.

We are still seeing ebbing and flowing and it is failing to displace lost revenues.

It is, so far, a failure.

 

[BootsLoader]

I thought Phil Spencer was awarded with an Oscar of something for innovation or handling Xbox division good or something?

 

[onnextflix5]

Who would have thought that you need good exclusive games to sell hardware,

well not ms for the last 20 years

 

[bitbydeath]

Lol spending 70 billion dollars to axe something is one way good analysis there.

No way they’d close it, if anything I’m sure either Apple or Amazon could buy it. Nintendo and Sony wouldn’t be allowed even if they had the money.

 

[GHG]

Xbox has never been a big performer for MS in 20 years. Out of all the key product lines and pillars, it's got to be the worst one out there compared to cloud, windows, MS Office, server stuff etc...

But it's still around.

This is the first time they are plugging significant investment into it. If it doesn't result in increased revenue then serious questions will be asked, both internally and from investors.

Reminder - this is the division that has been given the cash to execute the biggest acquisition in Microsoft's history.

 

[reksveks]

Listening to the earnings call, going to pay for this tomorrow morning