Microsoft's hardware division revenues showed a sharp decline, despite improve tablet sales.

The company just released its third quarter 2015 results, which showed Xbox revenue down 24 percent and sales down 20 percent year-on-year. However, some of these losses were offset by improved Surface tablet sales, meaning that the entire hardware division only had a decreased revenue of 4 percent.

The Xbox sales include both Xbox 360 and Xbox One sales. This is an important fact because a good bit of the decreased revenue could have been caused by a marked drop in Xbox 360 sales – something that's natural at this point in a system's lifecycle. Also, the $50 price drop of Xbox One likely bit into Microsoft's margins on the system. Overall, Xbox revenues were down $306 million.

[Source: Gamasutra]

Our Take

Obviously, this isn't good news for Microsoft. However, they likely expected some effect from the price drop and the console transition. This is a marathon, not a sprint, so it's important not to read too much into any one quarter.