Microsoft notes decline in Xbox unit sales for Q3 FY15 to 1.6 million

By Stephany Nunneley, Thursday, 23 April 2015 21:23 GMT

Microsoft reported its Q3 FY15 earnings today, citing growth in Xbox Live usage as one of the contributing factors to the firm’s reported revenue. However, the firm noted a decline in units sales for its Xbox consoles during the quarter.

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The firm said the 30% growth in the Xbox Live service was “driven by increased users and deeper user engagement” and contributed to company wide revenues of $21.7 billion. Xbox Live users increased by 18%.

Xbox Platform revenue decreased $306 million or 24%, driven by a 20% decline in console volume and lower prices of Xbox One consoles compared to the prior year. The firm moved 1.6 million Xbox consoles during Q3 compared with 2 million year-over-year.

For the nine months ended March 31, compared to the same period in 2014, Computing and Gaming Hardware revenue increased $499 million or 6%, primarily due to higher revenue from Surface, offset in part by lower revenue from Xbox Platform.

Xbox Platform revenue decreased $471 million or 8%, driven by lower prices of Xbox One consoles compared to the prior year, as well as a decrease in second and third-party video games revenue.

Microsoft sold 10.7 million Xbox consoles during the first nine months of FY15, which is a 100,000 unit increase compared with 10.6 million consoles during the same period in 2014.

Computing and Gaming Hardware gross margin, which is the difference between revenue and cost, increased $479 million or 55%, mainly due to higher revenue. Computing and Gaming cost of revenue was flat. Xbox Platform cost of revenue decreased $138 million or 3%, mainly due to lower cost per console sold.

For Q3, Computing and Gaming Hardware revenue decreased $72 million or 4%, primarily due to lower revenue from the Xbox Platform. Microsoft said part of the decline was due to “unfavorable foreign currency impact of approximately 4%.”

Cost of revenue decreased, primarily due to a $265 million or 27% decline in Xbox Platform cost of revenue, driven by lower volumes and a lower cost per console sold.

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Despite the lower Q3 sales of Xbox consoles, and rather flat nine-month sales, revenue for company’s Device and Consumer business, which houses Xbox, grew $9 billion or 8% to $1.3 billion over the last nine months, thanks to Surface Pro, Xbox Live, first-party video games, Minecraft, and Office 365 Consumer.

For Q3, the Device and Consumer division reported $456 million, an increase of 25%, partly due to higher revenue from Xbox Live, first-party video games and Minecraft.

Xbox Live and other store transaction revenue increased $144 million or 32% thanks to Xbox Live transaction revenue. First-party video games and Minecraft revenue also increased, mainly due to sales of Minecraft following the acquisition of Mojang.

For the nine months, store transaction revenue, which includes Xbox Live, increased $315 million or 25%, primarily due to growth in Xbox Live transaction revenue, driven by increased users and revenue per user.

First-party video games and Minecraft revenue increased $305 million or 83%, mainly due to sales of Minecraft and new Xbox titles released in the current year.

As usual, actual unit sales of either Xbox console weren’t noted. A call to investors will take place soon, and it’s possible Microsoft will gives us a better idea of how the consoles are fairing.

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