Big Tech companies weren't the only ones reporting earnings this week; some of the biggest players in the gaming industry were, too. And there was a sharp divide: While the outlook's good for console manufacturers, things are less peachy on the software side.
Sony and Microsoft both reported earlier in the week, and both companies' gaming divisions had pretty good quarters. While PS4 sales dropped, unsurprisingly, software and subscription revenue soared. And an optimistic outlook for the PS5 — Sony's hoping to sell 7.6 million by the end of March — and the subscription and software sales that should entail, led Sony to raise its full-year operating income forecast by 13%.
- It was a similar state of affairs for Xbox. Overall gaming revenue was up 22% year-on-year, driven by a 30% boost in gaming content and services. Both companies' results were a reminder that as game purchases shift toward digital, console manufacturers stand to win big.
- Facebook, the newest entrant to the console wars, is also doing well: It said Oculus Quest 2 preorders were five times higher than the original Quest's, confirming Protocol reporting that the new VR headset is a huge hit.
But buried in Microsoft's release was one worrying number. While a 30% boost in content and services revenue is good, it's a far cry from the 65% growth it reported in the previous quarter. That's reflective of a broader trend: Gaming's COVID-accelerated growth is slowing down.
- Take Activision, for instance. Though it beat expectations, its monthly active user numbers were down from 125 million in Q2 to 111 million in Q3. And its "tepid forecast," as Bloomberg put it, led to a sizable stock drop Friday.
- Ubisoft's situation is even worse, thanks to COVID-linked delays of the new Rainbow Six and Far Cry games. It cut its full-year forecast as a result, and its stock plunged 7%.
To be sure, the situation isn't awful: Growth is still strong. But it does seem that the huge boom from earlier in the year is coming to an end, and we're approaching something more like normality again. In a market with consistently high expectations, normal often isn't good enough.
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