Since the launch of the Xbox Series X in 2020, Microsoft has been unable to supply powerful consoles to stores for a long time and focused on promoting the cheaper Xbox Series S.
It was believed that the corporation simply did not have enough chips amid the coronavirus pandemic, but the trial of the Activision Blizzard purchase revealed another reason.
Microsoft had larger stocks of chips than analysts expected, but they were used to modernize the Xbox Cloud Gaming service, effectively sacrificing Xbox Series X supplies.
In the correspondence between the head of Xbox, Phil Spencer, and the financial director of the gaming division, Tim Stewart, dated December 2020, a "strategic bet on cloud gaming" is mentioned.
“I believe that our investments in content and xCloud are critical to realizing our long-term potential in the field of gaming.
Amazon Luna and Google Stadia do not have the power of consoles that we have, and do not offer users interaction with developers, the gaming community and the catalog of console-level content,” wrote Phil Spencer.
Microsoft tried to find a balance between the costs of releasing new content, producing consoles and upgrading cloud gaming servers around the world.
The corporation was ready to lose in console sales in order to achieve long-term goals. The servers of the cloud platform were transferred to the Xbox Series X capacity by the end of 2021.
Microsoft believes that in the future Xbox Cloud Gaming can reach billions of users. However, as of 2023, it is operating at a loss.