Activision Blizzard generated $1.68 billion for Microsoft in Q4, with Xbox hardware revenue down 42%

Call of Duty: Black Ops 6

Financial highlights

• According to its earnings release, Microsoft’s More Personal Computing segment, which includes Windows, devices, search, and gaming, reached $15.8 billion in revenue in Q4 — up 14.3% year-over-year. Operating income was $4.92 billion (+5.2%).
• Its full-year revenue and operating income were $62 billion (+13.3%) and $19.3 billion (+17.3%), respectively.
• As Microsoft noted in its SEC filing, gaming (Xbox, video games, Game Pass, third-party royalties, etc.) specifically brought in $21.5 billion in FY24, up 39% year-over-year. In Q4, gaming revenue grew 44% compared to the same period last year.
• The growth was driven by the performance of Xbox content and services, which saw full-year revenue increase 50% compared to 2023. In the fourth quarter alone, revenue grew 61% year-over-year.
• Console sales, on the other hand, were much more bleak: Xbox hardware revenue decreased 42% in Q4, with full-year revenue falling 13% (“driven by lower volume of consoles sold”).

Activision Blizzard’s impact on Microsoft’s gaming revenue

After completing the $75.4 billion Activision Blizzard deal last October, Microsoft started using a new metric in its financial reports called the “net impact from the Activision Blizzard acquisition.” It reflects the change of the company’s content from third-party to first-party and the impact of its revenue on the performance of Microsoft’s gaming segment.

• In FY24, Activision Blizzard reached a revenue of $5.72 billion and an operating loss of $1.36 billion (driven by various post-merger expenses).
• The net impact of the deal on Xbox content and services revenue was 44 points. This means without the Call of Duty maker, Microsoft’s annual revenue from video game content would have grown 6% year-over-year (instead of 50%). Also, keep in mind that the company’s FY24 ran from July 1, 2023 to June 30, 2024, and Activision was only added to its financial statements in October 2023.

• In the fourth quarter specifically, Activision Blizzard reached a revenue of $1.68 billion and an operating loss of $570 million.

Net impact from the Activision Blizzard deal in Q4 FY24

• The net impact of the acquisition on Microsoft’s total gaming revenue in Q4 was 48 points — i.e. without Activision Blizzard, the subsegment’s quarterly revenue would have declined 4% year-over-year (instead of growing 44%).
• As for Xbox content and services revenue, the net impact was 58 points. Excluding Activision Blizzard, it would have grown just 3% year-over-year (instead of 61%).