Microsoft (MSFT) Stock Gains After Xbox Game Pass Ultimate Sees Major Price Reduction

Key Takeaways

• Xbox Game Pass Ultimate pricing reduced by 23%, now $22.99/month from $29.99
• PC Game Pass sees a 15% decrease to $13.99/month from $16.49
• Day-one access to new Call of Duty releases eliminated from Game Pass subscriptions
• Xbox gaming revenue declined approximately 10% year-over-year with hardware plummeting 32%
• Recent Xbox leadership change under Asha Sharma drives pricing restructure

The Xbox division at Microsoft has faced mounting challenges. Gaming accounted for a mere 7% of overall company revenue in the most recent quarter, marking it as the sole major business segment experiencing decline.

Microsoft Corporation, MSFT

The financial picture painted a stark reality: console hardware sales plunged 32% following Microsoft’s decision to shelve two game projects, “Everwild” and “Perfect Dark.” CFO Amy Hood acknowledged during an analyst briefing that Xbox content and services revenue fell short of internal projections.

Game Pass Ultimate’s $29.99 monthly subscription had been in place since October, when Microsoft implemented a $10 increase. That pricing decision, as it happens, proved unpopular with consumers.

According to reports, Asha Sharma—Xbox’s newly appointed leader—communicated to staff via internal memo that the subscription had grown prohibitively expensive. Sharma, who joined from Meta, assumed control of Xbox in February following a leadership restructuring that saw Phil Spencer transition out and Sarah Bond depart.

Her solution: reduce pricing while maintaining the game catalog. Game Pass Ultimate falls to $22.99 monthly—representing a 23% discount. PC Game Pass decreases 15% to $13.99. Both adjustments took effect immediately.

The Call of Duty Compromise

There’s a significant caveat. Newly released Call of Duty titles will no longer debut on Game Pass at launch. Microsoft had leveraged the blockbuster franchise as a primary incentive for subscription growth, particularly following its massive $75.4 billion Activision Blizzard purchase in 2023.

Moving ahead, subscribers wanting immediate access to fresh Call of Duty releases must purchase them separately at $69.99. These games will join Game Pass approximately twelve months post-launch.

This represents a meaningful compromise—reduced subscription fees, but diminished launch-day content availability.

Game Pass subscriber count stood at 34 million throughout 2024. Microsoft has not released updated membership figures.

Competitive Landscape Pressures

Xbox remains behind Sony and Nintendo in both hardware sales and subscription service adoption. This competitive disadvantage has forced Microsoft to reconsider Game Pass’s value proposition and pricing strategy.

The termination of hardware initiatives and two game development projects signals a wider strategic reevaluation of the gaming division’s direction. Some industry observers have speculated about potential divestiture or scaling back of the Xbox business, though Microsoft has issued no official statements regarding such possibilities.

Amy Hood referenced an undisclosed impairment charge within the gaming segment during the recent earnings presentation. No specific amount was disclosed.

MSFT stock advanced approximately 0.79% in after-hours trading following the pricing announcement.

Analyst sentiment toward Microsoft remains predominantly bullish, with 34 Buy recommendations and 3 Hold ratings issued over the past three months. The consensus price target stands at $581.61.

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