Microsoft Has Never Turned a Profit on Xbox Hardware

As the trial between Epic Games and Apple over commission fees on in-app purchases continues, there was a revelation Wednesday that caught many by surprise: Microsoft has never turned a profit on hardware sales from its Xbox consoles.

The bombshell was revealed when Xbox VP Lori Wright took the stand to testify as a third-party witness. 

Epic’s lawyer Wes Earnhardt asked Wright about the profit margin Microsoft earns on Xbox hardware and she responded: “We sell the consoles at a loss.”

• The original Xbox, released in 2001, sold 24 million units. 
• Xbox 360, was even bigger, selling 84 million units in its lifetime. 
• Microsoft stopped reporting individual platform sales in 2015, saying it would focus on the number of active users of its services.

Microsoft partially offsets losses from Xbox hardware by implementing a 30% commission fee on PC game sales. Starting in August, Microsoft’s cut will drop to 12% — the same percentage Epic takes from sales in its store. 

Xbox Game Pass has soared to 23 million subscribers, but Xbox marketing executive Aaron Greenberg once said the service isn’t a “big profit play,” either. Licensing, investments, and maintenance keeps costs high.

Despite Game Pass and Xbox hardware’s lack of profitability, Microsoft’s broader gaming division is well-positioned for a competitive future.

The company saw its first $5 billion quarter for gaming revenue during its fiscal Q2 2021 — when the Xbox Series X|S hit the market. And with a near-$2 trillion market value, Microsoft has more than enough cash to support its Xbox teams for a long time.