Microsoft may be losing hundreds on each Xbox console sale, despite price increases

In a new Windows Central article, Jez Corden paints a bleak picture for Microsoft’s gaming investments. Adding to the problems, the memory shortage is an obstacle as it loses “hundreds of dollars per Xbox Series X|S console sold.” Multiple price increases haven’t prevented the damage, complicating any initiative to boost lagging hardware sales.

Xbox finances in peril

CEO Asha Sharma has admitted that Xbox is “not in a healthy spot,” prompting the need to “reset the business.” Jez Corden highlights how many first-party games did not meet expectations. Before the recent cuts, the Game Pass rate hikes also caused subscribers to flee.

Microsoft, Sony, and Nintendo have used software and services to mitigate losses from console sales. However, the storage and memory shortages are dramatically worsening manufacturing burdens. Sharma explained that component costs have risen by 50% since she became CEO and expects the AI-fueled crisis to continue.

While Sony and Nintendo face the same challenges, Corden believes Microsoft is in a more vulnerable position. He claims that “Xbox struggled to secure anywhere near enough memory with fixed prices necessary to keep its hardware margins healthy.” Without subsidizing Xbox consoles, selling more units could actually prove detrimental.

How console economics have changed

Even in 2022, Sharma’s predecessor, Phil Spencer, revealed that the company was losing $100-$200 per Xbox console sale. At the time, the Series X cost $499 with the Series S at $299. Spencer said there were no plans for Xbox price increases, but that was before tariffs and dwindling component supplies. The Series X now demands $649.99, with the Series S carrying a $400-450 MSRP.

Typically, when a system launches, manufacturers are willing to take a financial hit in order to accelerate adoption. Over the years, the cost of parts falls, and the assembly process becomes streamlined. In this generation, the opposite has happened, with the PS5 also becoming more expensive to produce.

With the Project Helix arriving as soon as 2027, Sharma aims to use innovation to navigate these economic realities. Recently, she hinted that future hardware revisions could be cloud gaming-focused, eliminating the need for large SSDs. Corden also suggests that Microsoft will rely on OEM partners to target specific regions, alleviating tariff penalties and optimizing distribution.