The recent report shows that Microsoft spent 400 million dollars more than it earned from the console.
While Xbox console sales increased from 9.8 million units in 2013 to 11.7 million units in 2014, manufacturing and distributing costs went up to 2.1 billion dollars while platform revenue only reached 1.7 billion dollars, Adweek reported.
Microsoft is spending more and more money on Xbox One to make it a device as a way to use multiple Microsoft products and services simultaneously.
However, Xbox strategy head Yusuf Mehdi acknowledged that a number of non-gaming features were removed from the Xbox One, such as app streaming and digital game purchasing, in response to user feedback, report said.
To win over gamers who only want to play games, Microsoft also removed its bundled motion capture device Kinect in May so it could lower the price of Xbox One to match market leader Sony PS4.