Xbox revenue dives as next generation looms in Microsoft Q2 2020 earnings

Xbox Game Pass at Gamescom 2018
Xbox Game Pass at Gamescom 2018 (Image credit: Matt Brown / Windows Central)

What you need to know

  • Microsoft has reported its FY20 Q2 earnings, featuring a 21 percent decline in gaming revenue, down $905 million.
  • Xbox content and services revenue also dropped 11 percent year-over-year, alongside a 43 percent drop in hardware revenue.
  • The decline comes as Microsoft readies for its next-generation Xbox.

Microsoft dropped Q2 earnings for its 2020 fiscal year today, outlining increased revenue to $36.9 billion, with major growth across Redmond's lineup of products and services. That pairs with a notable downturn for Microsoft's gaming portfolio, reporting a sizeable 21 percent decline in revenue over second-quarter 2019 earnings, down $905 million.

Waning Xbox performance comes as Microsoft readies for next-generation platforms, with Xbox Series X and PlayStation 5 scheduled for launch later this calendar year. That regularly couples with reduced investment from consumers, as internal efforts steady shift toward the upcoming decade of Xbox and supporting gaming services. Hardware revenue dropped 43 percent, as Xbox One sales reflect the imminent successor.

Microsoft also reports an 11 percent decline in Xbox content and services revenue, spanning supporting Xbox titles, subscriptions, and other fundamental components of the Xbox ecosystem. It attributes the year-over-year drop to an unnamed "third-party title," assumedly Fortnite or Red Dead Redemption 2. The free-to-play battle royale saw content revenue surge parallel to its peak, while Rockstar Games' western dominated 2018 sales. Growth of subscriptions, including Xbox Game Pass and Xbox Live Gold, partially offset this through increased revenue.

The 21 percent decline in overall gaming revenue is significant, signaling a weak period for Microsoft's Xbox efforts and beyond. Conversely, that decline does follow an impressive comparable quarter, with the reduced traction an upcoming generation brings. Microsoft's FY13 Q2 results, covering a similar period preluding Xbox One, saw an 11 percent tumble for the former "Entertainment and Devices Division," with a 28 percent drop in console sales.



Matt Brown

Matt Brown was formerly a Windows Central's Senior Editor, Xbox & PC, at Future. Following over seven years of professional consumer technology and gaming coverage, he’s focused on the world of Microsoft's gaming efforts. You can follow him on Twitter @mattjbrown.