This isn't too unusual for the console space

The console is sold at a loss initially & usually for some time after

The platform holder recoups the investment in hardware via its own first party game sales + services + the cut it takes from third parties that sell games / DLC https://twitter.com/thedextriarchy/status/1389980935479824384

Hardware being unprofitable certainly played a bigger role in the late 90's and early 2000's (oh and PS3 era lol).

Both the PS5 and Series X/S are being sold at a loss right now, but will become profitable down the line most likely.

Nintendo is somewhat of an outlier.

The PS4 was probably the first Sony console to flip the above concept somewhat.

While Sony aggressively cut the price of PS2, for example, down to $99, the PS4 maintained a $299 price point for multiple years and was profitable.

Switch was built to be profitable asap.

Going by redacted court documents as part of the Epic v Apple case, Microsoft is one of the gaming companies that generates $1 billion+ in profit from its software and services segment within gaming (2019).

Same Microsoft document has a breakdown of hardware revenue / profit estimates for Sony and Nintendo.

Hardware generating a loss for Sony, but profit for Nintendo.

https://storage.courtlistener.com/recap/gov.uscourts.cand.364265/gov.uscourts.cand.364265.551.4.pdf

Also you can work out Microsoft's software and services profit was $2.2 billion from this chart, given they forgot to redact the section I posted two tweets up.

Ofc that $2.2bn would have been offset by loss on hardware

To clarify the above. $2.2bn is not Microsoft's final profit on gaming. That's just gaming software and services profit.

You have to account for the loss that Microsoft takes on hardware, so the actual profit from Xbox would be much lower (or even negative)

For example.

The same document from Microsoft estimates that Sony had a profit of $4.1bn on software and services.

But it had a loss of ~$1.7bn from hardware.

So it's overall profit was $2.3bn