Microsoft pushes Xbox division to hit higher profit margins
|
|
Key points
- Microsoft demands its Xbox gaming division to produce profit margins of 30%, which is higher than the industry average.
- Bloomberg names Microsoft Chief Financial Officer Amy Hood as responsible for such an ambiguous target.
- According to S&P Global analyst Neil Barbour, a margin of 30% is at the outer range of what a gaming studio can hit in an outstanding year.
Microsoft demands its Xbox gaming division to produce profit margins of 30%, which is higher than the industry average, as revealed in Bloomberg’s report dated Oct. 23, 2025.
According to the report, the recent Xbox Game Pass Ultimate 50% price hike, which was accompanied by the removal of the 10% Game Pass game, IAP, and DLC discount in favor of a Microsoft Rewards points system, along with significant layoffs at Xbox in summer 2025 and the cancelation of games were the response to the goal of 30% “accountability margins,” which was set for Xbox by Microsoft’s execs.
According to estimates from S&P Global Market Intelligence referenced in the Bloomberg report, the average profit margin in the video game industry in recent years was in the range of 17%-22%, while for Xbox it was between 10% and 20% over the past six years.
According to S&P Global analyst Neil Barbour, a margin of 30% is at the outer range of what a gaming studio can hit in an outstanding year.
Bloomberg names Microsoft Chief Financial Officer Amy Hood as responsible for such an ambiguous target, which was implemented in fall 2023.
In July 2025, Hood told investors that Xbox operating income jumped 34% in the June quarter, attributing the growth to a “continued prioritization of higher margin opportunities.” The company’s next earnings report is due Oct. 29, 2025.
