There are two key things to note about Microsoft’s statement. First, this data reflects gross margins (revenue and the cost of revenue), not overall profit or losses. Secondly, and far more importantly, these figures are not totals for the year – they represent the changes over the previous year.
What does this mean? It means Microsoft increased its total revenue from Xbox by $1.7 billion compared to the previous year, while the cost of those sales – including what it costs to manufacture consoles – increased $2.1 billion. Microsoft’s revenue in this category, $1.7 billion, is an increase of 34 percent, which means the starting figure from last year was roughly $5 billion; the $2.1 billion cost of revenue increase is a 72 percent raise, which puts its starting figure at $2.9 billion.
Adding those figures together, that means Xbox sales resulted in roughly $7.1 billion in revenues against roughly $5 billion in costs. That’s not a $400 million difference that outlets such as Forbes are citing – they obtained their erroneous figures by simply adding the yearly increases together.
Still, however, the figures in Microsoft’s report don’t equate to profit or loss. Subtracting the $5 billion costs associated with Xbox production and other areas from Microsoft’s $7.1 billion Xbox revenue only represents gross margin, not the overall profit or loss.
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