Microsoft has released its financial report for the quarter ending September 30th. According to the report, Xbox hardware revenues dropped significantly by 30% compared to the same period last year. This was the latest indicator of a not-so-good year for Xbox.

Warning bells ringing for Xbox: Sales drop by 30%

The most striking detail in the released report is that this 30% drop does not yet reflect the impact of recent console price hikes. Microsoft had previously implemented console price hikes ranging from $20 to $70, but this increase took effect on October 3rd.

Similarly, the Game Pass Ultimate subscription fee was raised from $20 to $30 in October. Therefore, the true impact of both hardware and service price hikes on sales will become clear in the next quarter’s financial statements.

Despite this decrease in hardware, Xbox content and service revenues remained relatively unchanged compared to last year. Microsoft stated that the increase in revenue from Xbox subscriptions and third-party content (games from other publishers) partially offset the decline in its own studios’ (first-party) game content.

The Xbox division was one of the hardest hit by the global wave of layoffs Microsoft launched earlier this year. During this period, the company also halted several game projects in development for the console.

Among the canceled projects was Perfect Dark, a modern remake of the classic 2000 FPS. Microsoft had already closed the studio working on this game. Furthermore, Everwild, a long-running project developed by Xbox studio Rare, was canceled during the mass layoffs.

While the Xbox division is facing a challenging period, Microsoft is performing quite well overall. Total revenue increased by 17% year-over-year to $77.7 billion. Operating income increased by 22%.

Microsoft CEO Satya Nadella focused on the company’s artificial intelligence efforts rather than the games division during his earnings presentation. Nadella emphasized that Microsoft will increase its AI capacity by 80% this year and double its data center footprint over the next two years.

While the company’s focus is on AI, the sharp decline in hardware sales continues to be a topic of discussion among gamers. What do you think is the primary reason for this decline in Xbox console sales? Share your thoughts in the comments.