News Profit's Takes

Despite Reported Growth, Microsoft Falls Short Of Game Pass Goal

According to a recent financial filing with the SEC, the number of Xbox Game Pass subscribers increased by 37% over the last year. Despite these high marks, the company fell short of its internally set growth goal of 48%.

Even though Microsoft came up short of its subscriber goal, the organization said it beat Wall Street estimates for the company’s quarterly results on October 26th. Fox Business said that these financial results came on the heels of a “pandemic-induced demand” for cloud-based gaming services.

Additionally, Microsoft announced the company’s revenue increased by 16% during the first quarter of the organization’s 2022 fiscal year. Hardware sales were the driving force behind this growth. In fact, revenues generated from hardware increased by 166%.

“Xbox hardware revenue grew 166% driven by continued demand for Xbox Series X/S on a low prior year comparable,” reads Microsoft’s earnings report. “Xbox content and services revenue grew 2% … with growth in Xbox Game Pass subscriptions and first-party titles partially offset by declines from third-party titles.”

The Profit‘s Take:

This was an internally set target, so that is something to keep in mind when evaluating this story. They have roughly 18 million subscribers, but it’s clear that growth is slowing down right now. This showed up in a filing related to the CEO’s compensation because Xbox Game Pass subscription growth is a direct performance goal for Satya Nadella. It’s the only pure gaming metric listed in his payment plan. So, this makes it clear that Xbox Game Pass is one of the company’s most important strategic priorities. Right now, Xbox offers bundles that come with Game Pass. But, I wouldn’t be surprised if this ends up being the only way people can buy Xbox consoles in the future. The product essentially becomes a subscription service where they send you hardware, similar to Verizon sending you a modem.

(All information was provided by Axios, Fox Business, and VentureBeat)

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