Revealed: The Untold Story Behind Microsoft and Activision’s Financial Performance Report

On Wednesday, a report by The Information suggested that Microsoft’s acquisition of Activision Blizzard hasn’t led to the expansion that the company anticipated for its Xbox division at this stage.

The report cites (paywalled) an analyst—portfolio manager Danny Fish—who commented, “Activision has been underperforming” in terms of the overall revenue for the company. Upon reaching out for comments from Activision and Microsoft, representatives from both asserted that The Information’s report lacked certain details. The companies subsequently provided context to illustrate their performance since the acquisition and the status of Microsoft gaming.

Over its last four earnings reports, Microsoft has consistently reported revenue growth for Xbox content and services. Looking back to Q2 FY2024, Xbox content and services revenue rose by 61% “driven by a 55-point net influence from the Activision acquisition.” For the subsequent quarter, revenue was noted to have increased by 62% with 61 points attributed to Activision. In Q4 2024, revenue grew another 61%, with 58 points of net influence from the acquisition. Lastly, Q1 of FY2025 showed revenue rising by 61%, with 53 points stemming from Activision.

Dissecting the figures, Activision has been responsible for over 85% of the revenue increment in each quarter. It also indicates that over the past three quarters, there has been a slight continual growth outside of Activision’s impact, ranging from a low of one point to eight points as of Q1 FY2025.

Moreover, Microsoft CEO Satya Nadella hinted at the acquisition’s advantages during the company’s Q1 FY2025 earnings call last October, emphasizing the growth in gaming.

“We set new records for monthly active users in the quarter, as a greater number of players than ever engage with our games across devices and on the Xbox platform,” he stated, asserting that the business is “well-positioned for long-term growth.”

Concerning Xbox Game Pass, Nadella remarked that the service established a record for new Game Pass subscriptions on the launch day of Call of Duty: Black Ops 6. He noted that the service “set a new Q1 record for total revenue and average revenue per subscriber.”

Addressing the report’s suggestion that, in 2021, Microsoft CEO Satya Nadella claimed the company might “wind down its games business entirely,” the firm categorically rejects that notion. They refer to comments made at that time, indicating that Nadella had stated Microsoft is “all in on gaming.”

They concluded by asserting that engagement on Xbox platforms is “at an all-time high.” Microsoft claims they “are well over 500 million monthly players, and over the past year, we’ve observed consistent growth in monthly users on cloud.”

In response to the report’s assertions regarding Azure servers and the Activision deal not serving as a catalyst for other studios to launch their games on Game Pass, sources familiar with the Game Pass operations informed Insider Gaming that The Information’s report “confuses an opinion that developers fear profit loss with the reality that the business is already structured to compensate developers up front if that’s their preferred deal structure.”

Microsoft is scheduled to reveal its Q2 earnings for FY2025 on January 29.

What is your perspective on Microsoft and Activision’s rebuttal of several claims from the original report? Share your thoughts below, and join more discussions in the official Insider Gaming forums.

EDITOR’S NOTE: The article has been revised for clarity.

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