The Xbox One is dying: all hail the Xbox 2 Project Scarlett

Sales of Microsoft’s Xbox One games consoles are stuttering following the unveiling of the company’s new Xbox 2, codenamed “Project Scarlett”.

The news was revealed in Microsoft’s Q4 2019 earnings report on Thursday. The report showed huge growth in most of Microsoft’s businesses – highlights including its cloud, server and enterprise services divisions – which led to a staggering 12% revenue quarter-on-quarter increase to $33.7 billion.

But in the sea of positivity there was one key under performer: Xbox. The report showed a 10% drop in gaming revenue and a 3% drop in Xbox software and services revenue. These figures aren’t surprising as the consoles are all fairly old and with the PS5 and Xbox 2 set to launch next year interest in the old hardware has understandably waned.

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Microsoft CEO Satya Nadella also didn’t seem too bothered by the gaming slow down and chose to focus on the positive performance of the company’s business and cloud services in his statement to investors.,

“It was a record fiscal year for Microsoft, a result of our deep partnerships with leading companies in every industry,” he said.

“Every day we work alongside our customers to help them build their own digital capability – innovating with them, creating new businesses with them, and earning their trust. This commitment to our customers’ success is resulting in larger, multi-year commercial cloud agreements and growing momentum across every layer of our technology stack.”

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The Xbox 2, codenamed Project Scarlett was unveiled by Microsoft at E3 2019. Official details about the console are thin on the ground but from what little we know it should be a big upgrade on the Xbox One.

Microsoft has confirmed it’ll run using AMD’ Zen 2 and Radeon RDNA architecture, will come with faster GDDR6 memory, and a “next generation solid state drive (SSD)” that should radically improve load times. If that wasn’t enough to impress you, it’ll also be able to handle 8K resolutions, ray tracing and play games at variable refresh rates over 30fps according to Microsoft.

Even with these specs it’ll still have some pretty stiff competition. The PS5 has equally impressive hardware, from what we’ve seen. Google’s soon to launch cloud streaming platform could also be an unexpected rival. Google Stadia has the potential to offer gamers a cost effective way to stream and play triple-A titles without needing to invest in expensive hardware like the Xbox 2 and PS5.