Microsoft’s Xbox unit has been struggling. Gaming made up just 7% of total revenue last quarter, and it was the only major division heading in the wrong direction.
The numbers were blunt: hardware sales dropped 32% after Microsoft canceled two games, “Everwild” and “Perfect Dark.” Revenue from Xbox content and services came in below internal targets, CFO Amy Hood confirmed on a call with analysts.
Game Pass Ultimate had been sitting at $29.99/month since October, when Microsoft hiked the price by $10. That move, it turns out, went down badly.
Asha Sharma, the new head of Xbox, reportedly told employees in a memo that the service had simply become too expensive. Sharma, a former Meta executive, replaced Phil Spencer in February after a leadership shake-up that also saw Sarah Bond exit.
Her fix: cut the price, not the library. Game Pass Ultimate drops to $22.99/month — a 23% reduction. PC Game Pass comes down 15% to $13.99. Both changes are effective immediately.
There’s a catch. New Call of Duty titles will no longer land on Game Pass at launch. Microsoft had used the franchise as a key hook to drive subscriptions, especially after its $75.4 billion acquisition of Activision Blizzard in 2023.
Going forward, players who want day-one access to new Call of Duty releases will need to buy them outright at $69.99. Games will be added to Game Pass roughly a year after release.
It’s a notable trade-off — lower monthly cost, but less day-one content.
Microsoft said the changes reflect feedback from its player base. “Our players cover a wide breadth of geographies, preferences, and tastes,” the company said in a blog post.
Game Pass had 34 million subscribers as of 2024. Microsoft hasn’t updated that figure.
Xbox continues to trail Sony and Nintendo in both console sales and subscription services. The competitive gap has put pressure on Microsoft to rethink what Game Pass actually offers and at what price point.
The cancellation of hardware projects and two game titles suggests a broader reassessment of where the gaming division is headed. Some online speculation has pointed to a possible wind-down or sale of the Xbox business, though Microsoft has not confirmed any such plans.
Amy Hood flagged an unspecified impairment charge in the gaming segment during the latest earnings call. No dollar figure was given.
MSFT stock was up around 0.79% in after-hours trading following the announcement.
Wall Street remains broadly positive on Microsoft overall, with 34 Buy ratings and 3 Hold ratings from analysts in the past three months. The average price target sits at $581.61.
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