Xbox first-party content partially offsets 2% drop in Q1 revenue, hardware decreases 14%

Microsoft reported $92.3 billion in revenue for the first quarter, exceeding expectations while net income and earnings per share increased. Devices and consumer revenue dropped 3% to $15.5 billion, reflecting broader challenges in the segment. Xbox content and services revenue fell 2%, driven by weaker third-party contributions and Game Pass performance, though first-party titles helped mitigate the decline. Minecraft achieved record engagement and revenue, while hardware revenue decreased 14% due to supply constraints and lower console availability.

Xbox CEO Asha Sharma noted a 2% year-over-year revenue decline in Q1, an improvement from the 10% drop in the previous quarter. Sharma highlighted record performances for Minecraft and World of Warcraft Forever, strong Call of Duty releases, and double-digit growth in PC platform revenue. Console sales remain constrained by supply shortages, with demand outpacing available units despite efforts to expand refurbishment programs.

Microsoft EVP and CFO Amy Hood forecast mid to high-single-digit growth in Xbox content and services revenue for Q2, driven by upcoming first- and third-party content launches. Hood projected strongest growth in Q2, with sequential acceleration before deceleration in Q3 and further moderation in Q4. Hardware revenue is expected to decline year-over-year in Q2, continuing the trend observed in Q1.

Microsoft CEO Satya Nadella emphasized the company’s focus on expanding its game portfolio across console, PC, mobile, and cloud platforms. Nadella highlighted Modern Warfare 4’s strong reviews and the upcoming launch of Grand Theft Auto 6 on Xbox as key titles for the holiday season, reinforcing Xbox’s commitment to growth amid ongoing restructuring.