Microsoft CEO Satya Nadella rarely talks much about Xbox during the quarterly earnings calls he oversees for the company. Investors almost never ask questions about Xbox. It’s almost a footnote in these discussions, which increasingly focus on successes in artificial intelligence, an area that makes Microsoft a lot of money.
When he talks about Xbox, Nadella is almost always positive. There’s usually a small segment, a sentence or two, perhaps touting a major new release or Game Pass issue milestone, where he reminds everyone that it exists and is doing well to one extent or another. That’s why his tone during today’s earnings call when mentioning wink-and-you-miss-it Xbox was rather surprising.
Nadella’s statement today was vague and hopeful, but about as depressing as I’ve ever heard about gaming. He indirectly referenced the recent devastation: layoffs affecting 1,600 people, pending layoffs of 1,600 more people, and separation of four (possibly five) of its owned studios. Nadella called these “necessary decisions…to reset the company for long-term growth,” which is essentially the same thing Asha Sharma said.
“As it relates to Xbox, we are making the necessary decisions across our content portfolio, platform and operations to reset the company for long-term growth,” he said. “We have the best intellectual property in the industry and talented studios around the world, and we believe we can bring these strengths together and expect the company to return to growth in fiscal 2027.”
This is Nadella’s full statement, without any clarification on what “return to growth” means. THE a metric that was shared with usthat the division operates at a 3% profit margin, suggests profitability, but profitability is not the same as growth and the evidence suggests that Xbox has been in decline for some time now.
Compare that with what Nadella said about Xbox last year in a surprisingly long statement about the division that touted multiple successes and gave no indication that anything was seriously wrong:
“When it comes to games, we have 500 million monthly active users across all platforms and devices. And we are now the #1 publisher on Xbox and PlayStation this quarter, with the successful launches of Forza Horizon 5 And Oblivion Remastered. THE Call of Duty the franchise has never been stronger: 50 million people have played Black Ops 6. The total number of hours has exceeded 2 billion. Minecraft saw record monthly active usage and revenue this quarter, driven largely by the success of Minecraft movie. And we have nearly 40 games in development, with many more to come. We surpassed 500 million hours of gameplay streamed via the cloud this year. And the annual turnover of Game Pass amounted to almost $5 billion for the first time.
Microsoft overall reported “a record fiscal year” with revenues exceeding $331 billion, but also suffered major cuts across the company this month anyway.