Microsoft posted their annual earnings report for fiscal year 2014, which ended on June 30th. Contrary to popular belief, the Xbox isn’t doing all that bad and we can see a pretty decent increase of consoles sold compared to last year. The results reveal that the Xbox One and Xbox 360 combined sold 11.7 million units, 1.9 million more than in 2013 when they only managed to sell 9.8 million. Unfortunately the company doesn’t say how many Xbox One consoles were sold so one can only speculate. We know that 5 million units were sold by the end of April and that Xbox One’s were “flying of the shelves” with sales apparently doubling ever since the Kinect was dropped back in June, but we have no specific figures at this time. Regardless, Microsoft managed to sell almost 12 million consoles during fiscal year 2014 even though Xbox 360 sales have decreased and the Xbox One is still reportedly lagging pretty bad behind the PS4. The results aren’t that awful all things considered.
However, there is an important observation that needs to be made. This report states that Xbox Platform revenue increased by $1.7 billion compared to last year thanks mainly to the Xbox One. However, it also says that the Xbox Platform cost of revenue increased by $2.1 million so they’re basically reporting a $400 million loss. More specifically, they made $400 million less than last year from Xbox consoles. Is this bad for Microsoft? Well, it definitely isn’t good, but they make plenty of money from their other divisions so it shouldn’t affect things too much. Furthermore, this is not that strange given that they had to invest a lot of money when the Xbox One launched in order to advertise their new product. The full report can be read below.
“Computing and Gaming Hardware revenue increased $3.2 billion or 49%, primarily due to higher revenue from the Xbox Platform and Surface. Xbox Platform revenue increased $1.7 billion or 34%, due mainly to sales of Xbox One, which was released in November 2013, offset in part by a decrease in sales of Xbox 360. We sold 11.7 million Xbox consoles during fiscal year 2014 compared with 9.8 million Xbox consoles during fiscal year 2013. Surface revenue increased $1.3 billion or 157%, due mainly to a higher number of devices and accessories sold.”
“Computing and Gaming Hardware gross margin decreased slightly, due to a $3.2 billion or 59% increase in cost of revenue, offset in part by higher revenue. Xbox Platform cost of revenue increased $2.1 billion or 72%, due mainly to higher volumes of consoles sold and higher costs associated with Xbox One. Surface cost of revenue increased $970 million or 51%, due mainly to a higher number of devices and accessories sold, offset in part by a charge for Surface RT inventory adjustments of approximately $900 million in fiscal year 2013.”