Following the largest acquisition in tech history, Microsoft’s leaders are placing enormous expectations on Xbox’s financial performance. The $70 billion acquisition of Activision Blizzard King in 2023 brought thousands of employees and eight billion-dollar IPs under the Xbox umbrella, instantly bolstering its portfolio with mega-hits like Call of Duty, World of Warcraft, and Candy Crush. This acquisition was a major win for Xbox, but it also came with a heavy burden of responsibility, particularly as the gaming industry grappled with uncertainty and pressure for growth.
The pressure is felt keenly by the Xbox team, as Microsoft’s board and executives scrutinize quarterly results with heightened intensity. While Xbox has delivered impressive results, particularly the record-breaking $21.52 billion in revenue generated in FY24, the question of profitability remains largely unanswered. Sources close to Xbox have hinted that meeting internal profit targets is proving challenging. While we have access to revenue figures, the specifics of Xbox’s profitability remain a mystery, with only vague glimpses offered through measures like the ‘accountability margin.’
Microsoft’s corporate structure complicates the situation. Xbox falls under the ‘More Personal Computing’ business unit, and profits from the gaming division are not publicly disclosed in quarterly or annual briefings. This lack of transparency fuels speculation and raises questions about Xbox’s actual profitability. Xbox gaming CEO Phil Spencer acknowledged the high expectations within Microsoft, stating, “And we run a business. It’s definitely true that inside of Microsoft, the bar is high for us in terms of the delivery that we have to give back to the company. We get a level of support from the company that’s just amazing, in what we’re able to go do.”
The Activision acquisition has undeniably boosted Xbox’s reach and potential, but the road to profitability remains long and uncertain. The coming months will be crucial in determining whether Xbox can deliver on its promises and justify the massive investment Microsoft has made.
