Microsoft’s gaming revenue climbed significantly year over year, according to its Q3 earnings report. But the massive jump in takings is deceptive — most of it is just reflective of the addition of Activision Blizzard (and King!).
For the third quarter of fiscal 2024, Microsoft reported gaming revenue up 51% year-over-year, or $1.8 billion, to a total of $5.45 billion. It’s a record Q3 for the segment, but it comes with a caveat. 55 points of that net impact were from the Activision Blizzard acquisition, meaning that Xbox content and services revenue not related to Activision Blizzard was actually down 4% year-over-year. We saw a similar situation last quarter, too, and will almost certainly see it again in the next two.
Xbox content and services revenue is in a similar boat. It’s up 62% year-over-year, but with 61 points of net impact from Activision Blizzard, meaning it’s only up 1%. And hardware revenue, which wasn’t touched by the acquisition, is down 31% due to fewer consoles sold.
There are a number of other nuggets in Microsoft’s 10-Q that highlight how Activision Blizzard is impacting the gaming division and the company as a whole. Operating expenses, for instance, were up $1.3 billion or 41% year-over-year for the More Personal Computing division (of which Gaming is a part) last quarter, 43 points of which came from the acquisition. And research and development expenses in particular are up – $669 million, to be precise. That’s up 10% year-over-year for the More Personal Computing last quarter, 9 points of which were from Activision Blizzard. Sales and marketing expenses, too, were up meaningfully from the acquisition, as were general and administrative expenses.
It’s expensive to buy another big company, even beyond the $69 billion Microsoft paid for it in the first place. The real value of Activision Blizzard to Microsoft will ultimately remain to be seen in the coming years, when we can look at gaming revenue in future quarters compared to this one, and see if Xbox was able to capitalize on its expensive purchase.
Update 3:08pm PT: In the earnings call today, Xbox projected a very similar quarter ahead, with gaming sales growth in the low-to-mid 40s for Q4, with around 50 points of net impact from Activision Blizzard. Similarly, Xbox content and services growth is expected to be in the high 50s, with around 60 points of net impact from Activision Blizzard. And hardware is once again expected to decline year-over-year.
Original story continues: Meanwhile, earlier today, Blizzard announced it would not be holding BlizzCon in 2024, a decision that comes not long after a series of Xbox-wide cost-cutting measures that led to the layoffs of 1,900 people.
Rebekah Valentine is a senior reporter for IGN. Got a story tip? Send it to rvalentine@ign.com.
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