MS Earnings Call FY23Q2

eastmen

Legend
Supporter
Gaming Summary:
- Gaming Revenue decline 13% (down 9% CC)
- Xbox content and services down 12% (down 8% CC) on a strong prior year
- Xbox HW down 13% (down 9% CC)

MS Summary:

Business Highlights

Revenue in Productivity and Business Processes was $17.0 billion and increased 7% (up 13% in constant currency), with the following business highlights:
· Office Commercial products and cloud services revenue increased 7% (up 14% in constant currency) driven by Office 365 Commercial revenue growth of 11% (up 18% in constant currency)
· Office Consumer products and cloud services revenue decreased 2% (up 3% in constant currency) and Microsoft 365 Consumer subscribers grew to 63.2 million
· LinkedIn revenue increased 10% (up 14% in constant currency)
· Dynamics products and cloud services revenue increased 13% (up 20% in constant currency) driven by Dynamics 365 revenue growth of 21% (up 29% in constant currency)

Revenue in Intelligent Cloud was $21.5 billion and increased 18% (up 24% in constant currency), with the following business highlights:
· Server products and cloud services revenue increased 20% (up 26% in constant currency) driven by Azure and other cloud services revenue growth of 31% (up 38% in constant currency)

Revenue in More Personal Computing was $14.2 billion and decreased 19% (down 16% in constant currency), with the following business highlights:
· Windows OEM revenue decreased 39%
· Windows Commercial products and cloud services revenue decreased 3% (up 3% in constant currency)
· Xbox content and services revenue decreased 12% (down 8% in constant currency)
· Search and news advertising revenue excluding traffic acquisition costs increased 10% (up 15% in constant currency)
· Devices revenue decreased 39% (down 34% in constant currency)

Microsoft returned $9.7 billion to shareholders in the form of share repurchases and dividends in the second quarter of fiscal year 2023, a decrease of 11% compared to the second quarter of fiscal year 2022.
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Earnings Call will be at https://www.microsoft.com/en-us/Investor/events/FY-2023/earnings-fy-2023-q2.aspx
Earnings Slide: https://www.microsoft.com/en-us/Investor/earnings/FY-2023-Q2/document/viewdocument/SlidesFY23Q2.pptx
Earnings Excel: https://www.microsoft.com/en-us/Inv...nt/viewdocument/FinancialStatementFY23Q2.xlsx
 

eastmen

Legend
Supporter
Looking from the outside the hardware miss for consoles seems to be the big worry. Software can be explained by the lack of big titles. I am sure numbers would have looked much different if Starfield and redfall made 2022 releases. Hopefully this is a much better year for them with forza , starfield and redfall hitting early in the year and hopefully a few more bigger games in the fall

Their cloud offerings are showing great continued growth .
 

Remij

Veteran
Looking from the outside the hardware miss for consoles seems to be the big worry. Software can be explained by the lack of big titles. I am sure numbers would have looked much different if Starfield and redfall made 2022 releases. Hopefully this is a much better year for them with forza , starfield and redfall hitting early in the year and hopefully a few more bigger games in the fall

Their cloud offerings are showing great continued growth .
Hardware can be explained by lack of big titles as well.

When your competitors are releasing games from their biggest IPs.... and you literally have NO response time and time again... then negative sentiment starts building up.

It's not just this years titles either which can save them... they have to have some solid hits this year, and also prove to everyone that they'll follow up with more next year as well, and show those games in a good state... Because right now, my impression of Xbox is that you get one or two titles from them... then you don't hear or see anything for a couple of years... and in the meantime it's just "we have an exciting year coming up".. and other excuses.. They can't do that while their competition is hitting home runs.

They need to start money hatting some BIG games for at least a year timed exclusive. Get the Japanese games that PS gamers love to hang over the heads of Xbox players.. and take the hit for the lack of initial sales.. They need to change people's mindset. Nobody buys games for Xbox because you can never guarantee you'll get any future games there.. so it's a catch 22. They have to break that cycle..

Stop playing nice with Sony... no more kumbaya.. and get your damn management in order. Treat your developers right, and they'll start putting out products you can be proud of. Stop with hiring contractors and start hiring TEAMS which will want to stay and foster growth.. not only in the studio, but for IPs as well.

God damn.. You know... before Phil Spencer (I love the guy) but still... before him, you could understand that Mattrick messed everything up, and that there was a lot of politics within the company that was impeding Xbox from truly spreading its wings... so it was hard for Xbox to prosper when people from the inside were literally trying to hold it back.. but what the hell is the excuse now? Phil's had money to buy studios upon studios.. he has the full support from the head honcho... he's made some very smart moves with GamePass and the Cloud aspect of it... but the gaming division just doesn't have their shit in order... and time and time again it doesn't look like they will ever get their shit in order. 343i needs to be dissolved, build a new studio with new people for a fresh new take on Halo. As much as I like Infinite's gameplay... everything else has been a massive failure. Ride that game out as long as you can until you have a kickass new take on Halo that looks stunning and does something different.

The fans are literally starving. I like Xbox, and I like getting their games on PC.. but if I was a console only Xbox fan right now... I'd be pretty depressed.
 

eastmen

Legend
Supporter
Hardware can be explained by lack of big titles as well.

When your competitors are releasing games from their biggest IPs.... and you literally have NO response time and time again... then negative sentiment starts building up.

It's not just this years titles either which can save them... they have to have some solid hits this year, and also prove to everyone that they'll follow up with more next year as well, and show those games in a good state... Because right now, my impression of Xbox is that you get one or two titles from them... then you don't hear or see anything for a couple of years... and in the meantime it's just "we have an exciting year coming up".. and other excuses.. They can't do that while their competition is hitting home runs.

They need to start money hatting some BIG games for at least a year timed exclusive. Get the Japanese games that PS gamers love to hang over the heads of Xbox players.. and take the hit for the lack of initial sales.. They need to change people's mindset. Nobody buys games for Xbox because you can never guarantee you'll get any future games there.. so it's a catch 22. They have to break that cycle..

Stop playing nice with Sony... no more kumbaya.. and get your damn management in order. Treat your developers right, and they'll start putting out products you can be proud of. Stop with hiring contractors and start hiring TEAMS which will want to stay and foster growth.. not only in the studio, but for IPs as well.

God damn.. You know... before Phil Spencer (I love the guy) but still... before him, you could understand that Mattrick messed everything up, and that there was a lot of politics within the company that was impeding Xbox from truly spreading its wings... so it was hard for Xbox to prosper when people from the inside were literally trying to hold it back.. but what the hell is the excuse now? Phil's had money to buy studios upon studios.. he has the full support from the head honcho... he's made some very smart moves with GamePass and the Cloud aspect of it... but the gaming division just doesn't have their shit in order... and time and time again it doesn't look like they will ever get their shit in order. 343i needs to be dissolved, build a new studio with new people for a fresh new take on Halo. As much as I like Infinite's gameplay... everything else has been a massive failure. Ride that game out as long as you can until you have a kickass new take on Halo that looks stunning and does something different.

The fans are literally starving. I like Xbox, and I like getting their games on PC.. but if I was a console only Xbox fan right now... I'd be pretty depressed.

It may be the impression that you get but its not actually what is going on

Ms studios in 2019 Released Crackdown 3 , Gears 5
Ms studios in 2020 released wasteland remastered , ori and the will of the sisps , bleeding edge , gears tactics , Minecraft dungeons , Bards tale remastered , Flight simulator , battle tolds , tell me why , arge of empires 3
MS studios in 2021 released Psychonauts , Age of empires 4 , forza horizon 5 , halo infinte
MS Studios in 2022 released Grounded , , pentiment , as dusk falls

So they have games releasing. They are actually releasing a much wider range of content than sony. In 2023 Ms is going to release Forza motorsport , Minecraft legends , Starfield , Redfall all likely in the first half .
 

Remij

Veteran
It may be the impression that you get but its not actually what is going on

Ms studios in 2019 Released Crackdown 3 , Gears 5
Ms studios in 2020 released wasteland remastered , ori and the will of the sisps , bleeding edge , gears tactics , Minecraft dungeons , Bards tale remastered , Flight simulator , battle tolds , tell me why , arge of empires 3
MS studios in 2021 released Psychonauts , Age of empires 4 , forza horizon 5 , halo infinte
MS Studios in 2022 released Grounded , , pentiment , as dusk falls

So they have games releasing. They are actually releasing a much wider range of content than sony. In 2023 Ms is going to release Forza motorsport , Minecraft legends , Starfield , Redfall all likely in the first half .
So then you're telling me MS is screwed.
 

iroboto

Daft Funk
Legend
Supporter
So then you're telling me MS is screwed.
Reddit Xboxone and xboxseries subs are my general barometer of how people feel about Xbox who are Xbox players and fans.

And you are right. It’s not good. That’s why this is a critical year for them, they really need to turn it around. Buying ABK just buys them time, I agree there is a critical management problem happening at not having a clue on how to position their first party games properly.

Scale down. Get it the formula right. Then scale it back up.
 

BRiT

(>• •)>⌐■-■ (⌐■-■)
Moderator
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Supporter
Microsoft forecasts for Q3 2023 earnings:
  • Overall gaming revenues to decline in high single digits %
  • Xbox content and services declining in low single digits %
  • Windows OEM revenue to decline in mid to high 30%
  • Devices (Surface) revenue to decline mid 40%

 

JPT

Veteran
Supporter
Are not the decline just on the backend of covid, people stopped hanging around at home and left their homes and started spending money on other things?
I would assume the other big console company that is in direct competition with MS, will show same trends.
 

iroboto

Daft Funk
Legend
Supporter
It’s a bit early for a dramatic loss on hardware though so early on the generation. It’s a warning sign that people are looking for more than just game pass.

I would be concerned if I was part of the leadership team. 2023 is sink or swim. Because if Starfield and others flop. I doubt they have much in type pipeline to prop it up 2nd half 2023 and really not sure what to expect 2024.
 

Inuhanyou

Veteran
I can only imagine where MS would be with their Xbox divison without Bethesda and maybe Activision blizzard. Mismanaged studios to hell and no output due to absolute incompetence. With starfield coming out however maybe they will get some wind from that.

I also think as far as their console division is concerned, series S is probably hurting them a bit. I think series S is a great value that's why I'm trying to sell my 360 and games to get one.

But do casuals only see the price and think it's not worth getting? It's kind of unfair actually. Even if you don't buy it for the latest games, it has enough power to run og Xbox games, 360 games and Xbox one games very well. It's perfect legacy box imo, I'm glad it exist as there is more than enough content there to enjoy especially with gamepass
 
It’s a bit early for a dramatic loss on hardware though so early on the generation. It’s a warning sign that people are looking for more than just game pass.

I would be concerned if I was part of the leadership team. 2023 is sink or swim. Because if Starfield and others flop. I doubt they have much in type pipeline to prop it up 2nd half 2023 and really not sure what to expect 2024.

We don't know if there's been a drop in hardware units sold (the important bit for hardware). Hardware revenue isn't that important as a barometer of the health of the console. While revenue is down, we have no idea where hardware unit sales stand.

Xbox gaming revenue decline is more concerning, however, that is very much impacted by post covid consumer buying trends (heavily influenced by inflation and the economy).

Not saying it's great (it's not), but not sure we could expect it to be much better due to current global conditions. Sony are positioned better in this situation as there was more unfullfilled demand on their end than for MS. IE - even if they lost some potential buyers due to post covid consumer buying trends, there was so much demand that it just means that demand will plateau sooner (versus taking a dive as was the case for MS) than if there wasn't post covid buying trends.

Regards,
SB
 

Nesh

Double Agent
Legend

Following a record breaking Q1 last year, Microsoft has announced a 13% drop in Xbox gaming revenue for its latest quarter, but says that Game Pass has reached "new highs".

In its latest earnings report covering the current financial year's second quarter, ending 31st December 2022, Microsoft confirmed a 13% reduction in gaming revenue compared to the same quarter last year (thanks Windows Central), highlighting declines in demand for first-party content and lower monetisation in third-party content.

MS's wording with Gamepass reaching "new highs" while monetization falls is interesting
 

eastmen

Legend
Supporter
So then you're telling me MS is screwed.
Ms offers a wide range of titles vs sony which really offers just a single type of game with different skins on it. The advantage sony has is that it sells double the consoles that MS sells and so it gets all the other content released while the xbox doesn't .

MS has bigger titles coming out this year and we will have to see if that starts to move the needle for MS but yes MS is screwed which is why its buying companies like Bethesda and Activison. The more content that is exclusive or best on xbox the more people who will pick up the system

I wouldn't buy a playstation as they currently are because the sony exclusives don't appeal to me. I don't have much interest in third person adventure/action games and the xbox has games like age of empires , gears tactics and will have games like starfield which is part of my favorite genre.

It's also why I find it funny that MS buying activison is an issue for all these regulators but no one bats an eye at sony buying a dozen developers in 3 years. Sony is currently flying under the radar and its purchases have more of a chance of making console gaming worse for all but playstation buyers than Ms buying activison
 

JPT

Veteran
Supporter
It's also why I find it funny that MS buying activison is an issue for all these regulators but no one bats an eye at sony buying a dozen developers in 3 years. Sony is currently flying under the radar and its purchases have more of a chance of making console gaming worse for all but playstation buyers than Ms buying activison

How many games does those sony bought studios release per year, how many ip's do they have that sony can make platform exclusives?

How many games does ABK release per year, how many ip's does ABK have that ms could make platform exclusives?
 

eastmen

Legend
Supporter
How many games does those sony bought studios release per year, how many ip's do they have that sony can make platform exclusives?

How many games does ABK release per year, how many ip's does ABK have that ms could make platform exclusives?
It would all depend on their release schedules

I'll just start in 2019. Sony bought Audiokinectic , insomniac games , housemarque , nixxes , firesprite , fabrik games , bluepoint games , valkyrie , haven studios , lasengle , bungie , Savage game studios. since 2019

Activision studios consist of Shanghai , Beenox x, Demonware , Digital legends , High Moon Studios , Infinity ward , radical entertainment , Raven software , Sledge hammer , Solid state studios , Toys for Bob , Treyarch.

I believe Infinity ward , Sledge hammer , Treyarch and Raven are the COD developers .

Blizard from what I understand just has Teams 1-5

Team 1 is starcraft / warcraft . Team 2 is world of warcraft , team 3 is diablo , team 4 is overwatch , Team 5 is hearthstone


In terms of Blizzards output since 2019 they put out world of warcraft classic , warcraft 3 reforged , world of warcraft burning crusade classic , diablo 2 resurrected , diablo immortal , world of war craft classic lich king , over watch 2 , world of warcraft dragon flight.

So really they put out a bunch of remasters a cell phone game , overwatch 2 and 2 wow expansions.

Activision put out Crash team racing , cod mobile and cod modern warfare . Then COD warzone , Modernwarfare 2 remastared , Tony hawk 1+2 , Crash Bandicoot 4 , COD black ops cold war , COD vanguard , Cod Modern warfare 2 ,

Ms has offered Steam , Nintendo and sony contracts for 10 more years of COD . That takes away a lot of the output from Activision. I don't really see Sony having an issue keeping up with content releases with those companies I listed above added to Sony's roster.


I personally don't think Activision brings enough value to Xbox. Cod is going to be on all platforms , wow is still some what popular and putting in on xbox could get some buy in. Diablo 4 is already announced for ps5 . So unless Activision/ Blizzard has a lot of games under development no one knows about I don't think its going to move the needle all that much. I think bethesda was a much better buy for exclusive content on MS's platform

Now what I think could be interesting with Activision is if MS spins off some IPs. So they can't have COD proper as an exclusive but what if they did the tactics route ? Make a COD tactics or make a COD rts. They can add it into the rotation. Gears tactics , cod tactics , halo tactics and so on. They can do the same with Rts. halo wars , cod wars and so on.
 

Nesh

Double Agent
Legend
I check some of Sony's acquisitions and some have barely produced anything or anything remarkable, some arent even about producing games
i.e Audiokinetic is an audio software technology company for games.
Nixxes ports games to PC. Have not released any of their own games, only provided services to other games development.
Laseangle is a mobile game developer owned by Sony Music Entertainment that barely produced anything.
Savage havent produced anything on consoles or handhelds for a long time. Their portfolio has old franchise licensed games. Their last game according to Wikipedia was Marvel Ultimate Alliance 2 on PSP in 2009. Their revenue stream seems to be coming from simulation for DARPA.
Firesprite and Fabrik are basically one and the same, again with barely anything remarkable under the hood. The Persistence was the only high budget production game they produced.
Valkyrie was a supporting Studio for other Studios.
Bluepoint portfolio is remakes of games.
Housemarque's only AAA game ever produced is Returnal. Everything else is minor and mainly focused on making small scale games for Playstation.

Out of all of Sony's purchases the only remarkable powerhouses are Insomniac whose main track record of successful franchises were on Playstation, Bungie and maybe Bluepoint for their technical mastery.

MS's acquisitions are much stronger, much more powerful, much more capable at increasing value with the high potentiality also of removing value from other platforms since they own a massive number of successful multiplatform IPs.
 

fehu

Veteran
Another missed revenue is me because it's about 2 years and 3 months that I'm waiting to find a series x.
I think a lot of other people too.
 
MS had a rough 2022 by some people's estimation, but Sony had a rough 2021. These things go in cycles. You can argue that MS can't afford as many missteps as Sony, but the reality is that both companies have off years and 75% of Xbox gamers don't even care about exclusives and just need their FIFA, Madden, COD, etc... fix every year.
 
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