Microsoft has released its fourth-quarter financial results for the 2023 fiscal year. The company reported $56.2 billion in revenue and a net income of $20.1 billion during this period. This represents an 8 percent increase in revenue and a 20 percent increase in net income compared to the previous year.
However, the Windows and devices division of Microsoft has been struggling throughout the fiscal year. Windows OEM revenue, which is the amount PC manufacturers pay Microsoft to include Windows on their devices, has seen a significant decline for four consecutive quarters. In the fourth quarter alone, Windows OEM revenue dropped by 12 percent, primarily due to a weak PC market.
The decline in PC sales can be attributed to various factors, including macroeconomic headwinds, weak demand from consumers and businesses, and a shift in IT budgets. Research firm IDC highlighted these issues as the main reasons for six consecutive quarters of contraction in the PC market. As a result, Microsoft’s overall devices revenue, which includes HoloLens, PC accessories, and Surface devices, decreased by 20 percent in Q4.
Xbox hardware revenue also experienced a decline of 13 percent in the fourth quarter. This can be attributed to supply chain issues and lower demand for the Xbox Series S and X consoles. However, Xbox content and services revenue, which includes Xbox Game Pass, saw a 5 percent increase. Overall gaming revenue grew by 1 percent, indicating the continued growth of Xbox Game Pass, although specific subscriber numbers have not been provided by Microsoft for over 18 months.
In an effort to expand its gaming services, Microsoft has been focusing on the growth of PC Game Pass. The company launched PC Game Pass in 40 new markets earlier this year, and it has been a key driver for their subscription service. Recent pricing adjustments were made to Xbox Game Pass, with the Ultimate version increasing from $14.99 to $16.99 per month, and the base console version increasing from $9.99 to $10.99 per month.
Microsoft has also made changes to its offerings, announcing the end of the Xbox Game Pass Friends & Family plan in August. This plan was available in eight countries but was considered a preview program and will no longer be available after August 15th. It remains to be seen if this plan will return in the future.
Looking ahead, Microsoft plans to introduce a new subscription called Xbox Game Pass Core in September. Priced at $9.99 per month, it will serve as a replacement for Xbox Live Gold and will offer multiplayer online gaming and a catalog of over 25 games.
Additionally, Microsoft is working towards finalizing its acquisition of Activision Blizzard. The deadline for the deal has been extended to October 18th to allow negotiations with UK regulators. The UK’s Competition and Markets Authority initially blocked the deal due to concerns about cloud services in April, but the European Union approved the deal with a cloud gaming remedy in place.
In conclusion, Microsoft’s 2023 fiscal year has seen challenges in the Windows and devices division, but its cloud, office, and server businesses have continued to compensate for the weak PC market. The company’s focus on expanding its gaming services, including Xbox Game Pass and upcoming offerings like Xbox Game Pass Core, indicates its long-term commitment to the gaming industry.
