Microsoft Expects “Very Strong Demand” After Xbox Series X/S Launch & 40% Hardware Revenue Growth YoY

Today Microsoft hosted its quarterly financial conference call for investors and analysts, chief executive officer Satya Nadella and chief financial officer Amy Hood talked about the Xbox business.

Hood spelled Microsoft’s prediction for the current quarter (between October and December) which includes the launch of the Xbox Series X and S, and the Holiday season.

Hood mentioned that the company expects “very strong demand” following the release of the new consoles and 40% growth year-on-year in hardware revenue. This will help driving growth in overall gaming revenue between 26% and 29%.

That being said, she pretty much implicitly confirmed that the new consoles will be sold at a loss.

“In gaming, we expect revenue growth in the high 20% range. We expect very strong demand following the launch of our next-generation Xbox Series X and S consoles driving supply-constrained hardware revenue growth of approximately 40%.

We also expect a negative gross margin impact from console sales this quarter, as we invest against the growing lifetime value of the platform.

Xbox content and services revenue should grow in the low 20% range with strong engagement and continued momentum in Game Pass subscribers.

As a reminder, our outlook does not include Zenimax, which we still expect to close in the second half of the fiscal year. “

Nadella talked about the success of Game Pass and the Zenimax Media/Bethesda acquisition.

He also expressed delight for the early reviews and excitement for the upcoming Xbox Series X and S.

“Now to gaming. Gaming is the most expansive category in the entertainment industry.

Three billion consumers look to gaming for entertainment, community, and achievement, and our ambition is to empower each of them wherever they play.

Our Xbox Game Pass service has more than 15 million subscribers, quality differentiated content is the flywheel behind the service’s growth and the addition of EA Play next month along with our pending acquisition of Zenimax Media will add more of the world’s iconic franchises to more than a hundred high-quality games already available and materially increases our ability to increase content.

We’re also transforming how games are distributed and played and reaching new gamers on mobile and tablet by bringing cloud gaming to game pass.

Finally, we’re delighted by early reviews and excitement in the Xbox Series S and Xbox Series X, which will be the most affordable and the most powerful consoles available.”

If you’re interested in Microsoft’s financial performance (especially in regard to the Xbox business) you can check out our dedicated article from earlier today.

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