Xbox sales during Microsoft's third quarter fell 30% and there were little gains in content and services

Microsoft has released its financial report for the third quarter ended March 31, 2023, with the company noting a 30% decline in Xbox sales.

This was due to the prior year's comparable high that benefited from increased console supply.

As part of the More Personal Computing segment, despite sales of Xbox falling, content and services revenue for the console increased by 3%. This was driven by better-than-expected monetization in third-party and first-party content and growth in Xbox Game Pass.

For the quarter, the segment brought in $13.3 billion, a 9% decline year-over-year (yoy).

In Gaming, revenue declined 4%, which was ahead of expectations.

For Q4, in gaming, Microsoft expects revenue growth in the mid-to-high single digits. The company expects Xbox content services revenue growth in the low to mid-teens, driven by third-party and first-party content as well as Xbox Game Pass.

Microsoft noted in its investors call that Q4 and fiscal year 2024 will not include any impact from Activision, which it continues to work towards closing in the fiscal year 2023 - despite a big fat no from the UK regulatory board.

Earlier today, the UK Competition & Markets Authority (CMA) decided to prohibit the Merger between Microsoft and Activision Blizzard. The body felt the Merger would squeeze out cloud gaming competitors, as the Merger would make Microsoft "even stronger" with the likes of Call of Duty and World of Warcraft available for streaming. This is despite Microsoft having made a deal to include Activision Blizzard games available on 150 million more devices. Microsoft feels the CMA's decision reflects a "flawed understanding" of the cloud gaming market and the way relevant cloud technology works.

Depite the denial due to cloud gaming competition, the CMA did conclude the Merger would not affect competition among console services. In other words, it would not affect Sony despite what Sony, as the market leader, might say about it.

Because of the "no go" from the CMA, Microsoft is blocked from acquiring Activision Blizzard - even if the European Commission and the FTC in the US give the thumbs up. This means that if the latter two approve the merger, and Microsoft goes ahead with the acquisition, it would not be able to do business in the UK. This would be impractical for the company considering the importance of the UK market.

Microsoft said it will appeal the UK's decision, but the CMA isn't known for reversals.

The denial of the deal sent a few shockwaves across the gaming sector, and the decision also affected Activision Blizzard's share prices.

At the close of business on Tuesday, April 25, share prices were at $86.74 and fluctuated by a few dollars here and there, which is normal. However, when the US woke up to the news of the CMA's verdict, stock prices in the company took a hit and started selling at $76.28. The stock price continues to fluctuate, and as of press time, it stands at $76.90.

By comparison, Microsoft shares rose more than 7.5% in pre-market trading, but this was due to its strong Q3 earnings results. The previous close saw stock trading at $275.42 - now trading at $296.89 as of press time.