I know the first Xbox lost MS a crapton of money. That was fine, because they just wanted to get their foot in the door, and they could afford to spend money to do it.
However, I find it hard to believe that the 360 isn't profitable. Even if they're taking a loss on units, it's a smaller loss than Sony is taking on the PS3, and the software attach rates for the 360 are really high. MS is already selling tons of software in the second year of the 360's lifespan, and it will only accelerate in the future. They're not going to come anywhere near Nintendo's money-printing profits, but I do expect them to recoup most of their losses from the first Xbox, if not all and then some.
MS will also see a lot more Live subscriptions this generation, which is pure money in their pockets.
