May 25, 2024


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Microsoft: Game sales are rising dramatically

Microsoft: Game sales are rising dramatically

It wasn't unexpected: On a year-over-year basis, Microsoft was able to achieve a year-over-year increase in sales from its gaming division in the third quarter. However, this success cost Xbox $68 billion.

Microsoft Toy sales increased compared to the previous year A significant increase. This is what the company behind Xbox is referring to In the latest quarterly report. However, there is a reason behind this massive increase, which has cost the Redmond company several billion US dollars.

In fact, the record numbers belie the negative trend the balance sheet would have without the Activision Blizzard acquisition.

Microsoft's gaming revenue rose 51 percent

During the third quarter of fiscal year 2024, Microsoft recorded an increase in gaming revenues of 51 percent, or $1.8 billion, compared to the same quarter of the previous year. This resulted in total sales of $5.45 billion.

With this growth, Microsoft had a record quarter in its games division, but benefited primarily from the acquisition of publisher Activision Blizzard, including its King mobile division.

55 percentage points of the net impact can be attributed to the acquisition of the company behind Call of Duty. At the same time, this means that sales of gaming products that are not part of Activision Blizzard and King fell year-on-year.

The acquisition also boosted pure revenue from Xbox content and services. Sales increased by 62 percent compared to the previous year, with 61 percent of that coming from Activision Blizzard King sales. Without this impact, Xbox content and services would have seen minimal increase.

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The situation becomes clear through pure hardware sales, which were less affected by the acquisition. Here can be the possibility of exclusive games and Adding Activision Blizzard titles to Xbox Game Pass It may have had a certain effect in pushing buyers towards the Xbox console. But the numbers are ultimately disappointing. Hardware sales decreased by 31 percent due to a decrease in the number of consoles sold. As usual, Redmond did not disclose its sales figures.

Was Actiison Blizzard worth buying?

Whether the acquisition of Activision Blizzard and King is a worthwhile deal for Microsoft will only become clear in the coming years. A company's sales are one of the key numbers, but they do not reflect profitability. Profit (not mentioned) is more important and synergies must also be taken into account.

Ultimately, not only did sales increase, but also expenses within the gaming division rose significantly with the acquisition.

  • Operating costs for the More Personal Computing division (which includes the gaming division) increased by $1.3 billion, or 41 percent, in the fourth quarter compared to the previous year, as a result of the acquisition.
  • R&D spending increased by $669 million, an increase of 10 percent. Activision Blizzard was also the driving factor here.
  • In addition, sales and marketing costs increased significantly as a result of the acquisition. The same applies to overhead and administrative costs.

It is also worth taking a separate look at Activision Blizzard's work: In the third quarter, the publisher generated revenue of $1.97 billion. However, the total cost of integration, transactions and other revenue costs was $980 million.

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In addition to other operating expenses worth $1.34 billion registered Activision Blizzard reported a total loss of $350 million. At least shortly after the acquisition, the deal continues to lose money.

Radical measures were taken at the beginning of the year to cut costs:

Reinforcement will be repeated quarterly

A similar situation with game sales growing year on year It was already recorded in the previous quarter It will also happen in the next two quarters.

Accordingly, Microsoft expects gaming growth in the low to mid 40s for the fourth quarter of the current fiscal year, driven by revenue from Activision Blizzard King content.

Growth in Xbox content and services revenue is also expected to reach the high 50s, with the acquiring publisher seen as the driving force with a net impact of around 60 points. Meanwhile, Microsoft expects lower revenues in its Xbox hardware business.

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The decline in hardware sales and the increase in software sales once again confirm the approach that Microsoft is increasingly taking. With Activision Blizzard in its portfolio, the company has long been one of the largest multi-platform publishers. And PS5 versions of Xbox games like “Sea of ​​Thieves” or “Hi-Fi Rush” Give an idea of ​​where the trip will lead – Despite vague hardware warranties.

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