Xbox Game Pass Hits $5B Milestone Despite Massive Layoffs: Here's What To Watch Out For

Amidst sweeping layoffs and a strategic pivot, Microsoft delivered a remarkable win: its Xbox Game Pass subscription service generated almost $5 billion (£3.80 billion) in revenue during fiscal year 2025, marking a significant milestone as the division continues to defy hardware headwinds and extend its influence across platforms.

Shifting Tides: Hardware Decline vs Content Growth

While Xbox hardware revenue fell by 25% in the fiscal year ending 30 June 2025, Microsoft sees reason for hope after becoming the leading publisher on PlayStation in Q4. The latest financial results from the US tech giant confirm a decline in Xbox hardware sales.

However, annual gaming revenue rose by 9% year-on-year, reaching $23.5 billion (£17.85 billion). This growth was boosted by a 16% increase in annual Xbox content and services revenue, primarily due to the company's significant acquisition of Activision Blizzard.

Xbox's Expanding Reach: Beyond Its Consoles

According to Microsoft's latest 10-K filing, the company highlighted that Xbox revenue is primarily influenced by subscriptions and the sales of both its content and content from other companies.

'Growth of our Gaming business is determined by the overall active user base through Xbox-enabled content, availability of games, providing exclusive game content that gamers seek, the computational power and reliability of the devices used to access our content and services, and the ability to create new experiences,' the company stated.

During a quarterly earnings call, Microsoft CEO Satya Nadella mentioned that Xbox, along with LinkedIn, stands as one of the company's two consumer businesses boasting 'massive end user reach.'

Expanding Reach and Record Engagement

He also pointed out that the company's gaming business now boasts over 500 million monthly active users across various platforms and devices. He added that Xbox has gained considerable ground on rival platforms, thanks to its decision to bring major first-party franchises to both PlayStation and Nintendo Switch.

'We are now the top publisher on both Xbox and PlayStation this quarter, with the successful launches of Forza Horizon 5 and Oblivion Remastered,' the top executive added.

He added that Call of Duty: Black Ops 6 has been played by 50 million people, resulting in over 2 billion hours of playtime worldwide. Meanwhile, Minecraft saw record monthly active usage and revenue during Q4, boosted by the release of A Minecraft Movie.

Nadella also confirmed that Xbox Game Pass's annual revenue reached nearly $5 billion (£3.80 billion) for the first time in the last fiscal year. The chief executive hinted at further growth for its gaming business.

'We have nearly 40 games in development, so much, much more to come,' he added. 'We surpassed over 500 million hours of game play streamed via the cloud this year.'

The Human Cost: Layoffs and Developer Impact

Microsoft's latest financial results were released about a month after the company announced plans to lay off roughly 12,000 employees, a significant portion of whom were in its video game division. The company stated that these layoffs will boost efficiency and 'position the company and teams for success in a dynamic marketplace.'

Addressing the cuts described above, an Xbox spokesperson informed Game Developer that the company intends to 'empower employees to spend more time focusing on meaningful work by leveraging new technologies and capabilities,' while also removing redundancy.

Microsoft has not yet disclosed the full extent of the job reductions, but reports indicate widespread layoffs and cancelled projects at internal studios, including King, ZeniMax Media, and Rare. Additionally, the company reportedly shut down The Initiative and halted its Perfect Dark reboot.

In contrast to claims that the layoffs will facilitate development teams in the long term, some Xbox workers recently told Game Developer they expect the opposite outcome. They also criticised Microsoft for its chaotic and 'inhumane' handling of the process.