What does Microsoft mean by consoles are sold without profit margins?

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Microsoft says Xbox consoles are typically sold without profit margins because they are priced below their production cost.

Microsoft is describing a common console business model: unlike phones or computers, consoles are “typically not sold at a profit,” but instead are sold for less than it costs to make them. The company is effectively separating the economics of hardware from the economics of the broader gaming ecosystem that runs on top of it.
Consoles are priced differently from other consumer electronics
Microsoft contrasts consoles with phones or computers, saying consoles are usually not sold at a profit. This means the upfront hardware pricing is not designed to carry a profit margin in the way many other devices are.
Profit is expected to come from where the console ecosystem continues
In this model, the console is one part of a larger revenue stream that includes content and services tied to the platform. Microsoft’s gaming strategy context is visible in its reference to Xbox pricing changes alongside its earlier move in April to cut the price of its Xbox Game Pass subscription, which players had viewed as too expensive.
The current price rise is tied to higher component costs
Microsoft linked the worldwide Xbox price increase of US$100 (to US$150 starting August 1) to a component-cost surge fuelled by artificial intelligence demand. It pointed to memory and storage chips, saying their cost has more than doubled and is expected to double again by late 2027.
AI-driven demand has pushed up memory and storage costs across devices
Microsoft said the accelerated construction of data centres for AI training and applications has sent memory and storage chip costs soaring. It also noted that these chips are used in virtually all electronic devices, and that the market has faced major shortages for several months, which has driven prices up.

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What does Microsoft mean by consoles are sold without profit margins?

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