Microsoft Not Making Enough Money Despite Heavy Gaming Push

Microsoft published its earnings for the fourth quarter of the financial year 2022 today. The reports highlight where Microsoft saw a huge boost in revenue. It also showcases that certain product segments aren’t performing as well as they should.

The problem seems to be the global chip shortage and supply chain constraints. The report states that the revenue is up by 12% and stands at $51.9 billion, while the net income has only increased by 2%. It is certainly less than Microsoft’s expectations despite investing heavily in new products and services.

Which Microsoft divisions are not performing well?

The primary downfall is in Windows and Xbox segments. Covid-19 has been tough on the supply chain and is the primary reason for chip shortage. But why does Windows suffer a loss? It is because Windows is a primary source for Microsoft to earn commissions through OEMs that use the operating system on their devices. Since the manufacturing and supply are restricted, the OEM revenue fell 2% in the fourth quarter.

The Surface laptops division literally surfaced as a top-performing division in the fourth quarter. Going by the numbers, the revenue is up 10% from the previous quarter. The Surface division will complete ten years in the industry, and Microsoft may announce new laptops this year.

The latest Surface laptop Go offers an 11th-gen Intel chip, and we are eagerly waiting for the 12th-gen chips to arrive with the new Surface Go. You should expect the new devices to become more expensive because Intel is determined to hike the price of its CPUs and other components.

Moving on to the Xbox division, the reports state that hardware revenue saw a flat 11% decline in the revenue, which is an indication that the new Series X and S are finding it tough to be sold out like the PS5.

Both Xbox Cloud and Xbox Game Pass are enjoying a massive surge in the subscriber base. The former makes game streaming accessible, while the latter makes AAA games available at an economical price. The coming year could be tough for Microsoft if the hardware divisions face an even greater decline in revenue.