Xbox Cloud Gaming's new hourly cap is reportedly set exactly where Microsoft stops making money on it

Xbox has imposed a cloud gaming hourly cap of 15 hours for Game Pass Ultimate subscribers, as this is when the service ceases to be profitable, according to a new report. Earlier this week, Microsoft announced the implementation of hard monthly time limits for its cloud gaming streaming service across all three tiers of Xbox Game Pass subscriptions.

Windows Central, citing unnamed Microsoft sources, revealed that this cap is set at Microsoft's break-even threshold, with any usage beyond this point incurring costs for the company. The cost pressure is attributed to a wider squeeze on server memory due to Microsoft's AI investments, with Azure capacity being prioritized for AI workloads over game streaming.

This move is part of Xbox's broader cost-cutting strategy, following recent layoffs and cancelled projects. Despite the scaling back of cloud gaming plans, industry leaders remain optimistic about the future of cloud gaming, with Take-Two CEO Strauss Zelnick expressing belief that we will all be streaming games within three years.

The company has also rolled out an ad-supported game streaming test for its insider programs. This development comes amid a hardware crisis, where the cost of purchasing consoles and gaming PCs has become increasingly unaffordable, potentially leaving streaming as the only viable option for many in the future, despite its challenges.