Microsoft (NASDAQ:MSFT) has been making some big moves in the gaming space recently, purchasing both Bethesda and Activision Blizzard, launching new consoles, and pushing industry-disrupting Xbox Game Pass hard, but how well has it all paid off so far? Fairly well, based on the company’s latest set of financial results for the quarter ending December 31, 2021. Microsoft as a whole delivered $ 51.7 billion in revenue and $18.8 billion in net income during Q2 2022, largely powered by their intelligent cloud business, although gaming was also up 8 percent year-on-year. Overall, gaming brought in $5.43 billion during Q2, a holiday record, driven by a 4 percent year-on-year increase in hardware sales (the Xbox Series X/S remains supply-constrained) and a 10 percent increase in digital services (mainly Xbox Game Pass). Microsoft CEO Satya Nadella was unusually eager to boast about the performance of the Xbox division during Microsoft’s earnings call, providing some stats about individual games released during the quarter… While Xbox delivered a solid holiday quarter, it remains to be seen how quickly the business can continue to grow, with CFO Amy Hood only predicting “mid-single-digit” growth over the remainder of the year. Part of this may be down to the fact that Microsoft won’t be able to take full competitive advantage of their $70 billion Activision Blizzard purchase for a few more years. According to a new report from Bloomberg’s Jason Schreier, at least the next three Call of Duty titles will have to be on PlayStation in addition to PC/Xbox due to previously-signed commitments. That likely means 2022’s heavily-rumored Call of Duty: Modern Warfare 2, the next game from CoD Black Ops developer Treyarch, and the next major iteration of the lucrative CoD Warzone battle royale will be on PlayStation. As for what might happen after Microsoft fulfils it’s Call of Duty to PlayStation, that remains hazy. Focusing purely on the short term, there’s obviously more money to made putting Call of Duty on as many platforms as possible, but that isn’t necessarily what Microsoft is interested in. The ultimate goal is to build up Xbox Game Pass into a ubiquitous platform – similar to Netflix or Microsoft’s own Azure cloud service. If that’s the goal, locking down Call of Duty makes more sense. Needless to say, the gaming industry has some very interesting years ahead.
