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Microsoft's earnings continue to rise, despite lagging Xbox hardware sales

Microsoft's earnings continue to rise, despite lagging Xbox hardware sales

July 20, 2017 | By Alex Wawro

Microsoft's latest earnings report suggests the company had a good quarter and a good fiscal year, and its Xbox software and services businesses appear to be on an upswing even as revenue from sales of Xbox consoles slips.

For its fourth quarter, which encompasses the three months ending June 30th, the company claims that revenue from its game business (which includes Xbox hardware, software, and services like Xbox Live) was 3 percent higher (or ~$44 million more) than it was during the same period a year prior.

That growth was chalked up to "strength in Xbox software and services" which helped "offset lower hardware revenue." Specifically, revenue from sales of Xbox software and services rose 11 percent year-over-year, "primarily due to a higher volume of Xbox Live transactions."

Revenue from sales of Xbox hardware fell significantly, decreasing 29 percent year-over-year due to both a decline in the number of consoles being sold and lower prices for said consoles.

This is well in line with Xbox's fortunes in quarters past, and matches up with what Xbox boss Phil Spencer told Gamasutra earlier this year about his approach to running a modern console business.

"There's some things about how the console business runs, in terms of you don't make any money on the hardware, it's making money on the games, making money on the service," Spencer said. "That's how you kind of run a business around the console space." 

Of course, Microsoft has a new Xbox coming out later this year: the Xbox One X. However, Spencer has already publicly stated that the company does not expect to make money on sales of the console itself. 

Meanwhile, the company at large appears to be on a financial upswing. For its fourth quarter the company earned $5.3 billion in profits on $23.3 billion in sales, up from $3 billion earned on $20.6 billion in sales a year prior.

For its full 2017 fiscal year, the company reported $22.3 billion in profits earned on $89.9 billion in revenue. That's a bit more than the year prior, when it earned $20.1 billion on $85.3 billion in sales.

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