According to a recent report by The Information, Microsoft’s acquisition of Activision Blizzard has not led to the growth in their Xbox business as they had anticipated so far.
A report (which requires a subscription) attributes a comment to an analyst, Danny Fish, who is a portfolio manager, stating that Activision’s revenue performance for the company has been unsatisfactory. Upon contacting both Activision and Microsoft for their perspective, they responded by denying the accuracy of The Information’s report, asserting it distorts the truth through exclusion. They also shared data demonstrating how Activision has performed since its acquisition and updated information on Microsoft’s gaming sector.
Over the past four financial reports, Microsoft has consistently shown growth in Xbox content and service revenues. Starting from Q2 FY2024, this growth was significantly boosted (by approximately 61%) due to the acquisition of Activision. For the subsequent quarter, a similar increase of 62% was reported, with 61 points directly linked to the Activision deal. In Q4 2024, the growth remained at 61%, with 58 points from the purchase contributing to this rise. Lastly, in Q1 FY2025, revenue grew by another 61%, with 53 points stemming from the Activision acquisition.
In simpler terms, during each quarter, Activision has been responsible for more than 85% of the revenue rise. Moreover, over the past three quarters, there’s been a slight but steady growth in revenue outside of Activision, with a low of 1% in Q1 FY2025 rising to 8%.
Additionally, during the Q1 FY2025 earnings call in October, Microsoft’s CEO, Satya Nadella, hinted at the advantages of the acquisition, emphasizing its potential impact on the company’s growing gaming sector.
During the recent quarter, we surpassed previous records with an unprecedented number of people using our games simultaneously. This was achieved not just on specific devices but also on the Xbox platform. Moreover, he emphasized that our company is strategically placed to foster continued growth over time.
On the release day of Call of Duty: Black Ops 6, Xbox Game Pass saw an unprecedented number of new subscriptions, according to Nadella. Moreover, he mentioned that this resulted in a fresh quarterly record for overall revenue generated and the average income per subscriber.
According to the report’s recommendation, it was suggested in 2021 that Microsoft’s CEO, Satya Nadella, mentioned the possibility of completely shutting down their gaming business. However, the company firmly rejects this claim. They emphasize comments made at around the same time where Nadella stated that Microsoft is fully committed to the gaming industry, suggesting they are “all in” on gaming.
They concluded by noting that user engagement on Xbox platforms is currently at its peak. Microsoft reports having more than 500 million active monthly players and a steady increase in monthly cloud users over the past year.
Concerning the assertions in the report about Azure servers and the Activision deal not driving other studios to publish games on Game Pass, TopMob was informed that The Information’s report “combines a developer’s fear of potential profit loss with the fact that the business model is already designed to pay developers upfront if they prefer such terms for their deals”.
Microsoft is scheduled to announce its Q2 earnings for FY2025 on January 29.
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2025-01-17 00:17