Microsoft just posted the third quarter of its 2024 fiscal monetary outcomes. The software program maker made $61.9 billion in income and a web revenue of $21.9 billion throughout Q3. Revenue is up 17 p.c, and web revenue has elevated by 20 p.c.
This is the second quarter in a row that Microsoft is together with its further income from its Activision Blizzard acquisition that briefly pushed gaming to be Microsoft’s third-largest enterprise. This time round, gaming is again into fourth place behind Windows because of stronger than anticipated Windows OEM income this quarter.
Despite a robust quarter for Microsoft with Office income and Microsoft Cloud income up 23 p.c 12 months over 12 months, Microsoft’s total gaming revenues are solely up because of Activision Blizzard, with Xbox hardware income tanking this quarter alongside units (Surface) income additionally dropping as soon as once more.
This quarter, Windows OEM income is up 11 p.c 12 months over 12 months, a shock given Microsoft’s earlier steering that it might be comparatively flat. This is the value that PC producers pay to license Windows for laptops and PCs, and whereas it suffered in 2023, it has been selecting up once more all through 2024. Microsoft is now hoping to spice up its Windows OEM revenues over the summer season, with the launch of what it calls “AI PCs” which can be powered by Qualcomm’s newest Snapdragon chips.
We’re anticipating Microsoft to unveil its personal Surface units working on Snapdragon X Elite and X Plus chips on May 20th at a particular AI and Surface occasion. These new chips might be the most important CPU shake-up since Apple Silicon in the event that they’re in a position to ship the efficiency and battery life stability that Qualcomm is promising.
Microsoft will probably be counting on this push, significantly on the Surface facet. Once once more, units income has declined in Q3 by a large 17 p.c. Devices income has been down for properly over 12 months now, regardless of new launches of Surface units and Microsoft switching up its hardware portfolio amid layoffs. Microsoft now has a new Windows and Surface chief, after Panos Panay’s shock departure to Amazon final 12 months. Pavan Davuluri took over Windows not too long ago after taking on Surface units final 12 months. Microsoft cut up up the Windows and Surface teams below two totally different leaders final 12 months, however they’re again below a single chief now.
Over on the Xbox and gaming facet, Xbox content material and providers income, which incorporates Xbox Game Pass, is up by 62 p.c. This is as soon as once more because of Activision Blizzard revenues making up the majority of income.
Microsoft revealed in February that Xbox Game Pass has now grown to 34 million subscribers, together with the Xbox Game Pass Core (beforehand Xbox Live Gold) members. Four beforehand Xbox-exclusive video games are actually obtainable on PS5, with some launching on Nintendo Switch, too.
This strategic shift is proscribed to those video games for now, nevertheless it seems to be in response to a slowing of Xbox Game Pass progress and Xbox console gross sales. This quarter, Xbox hardware is down by a large 31 p.c, a big drop following a mushy quarter for Xbox gross sales in the course of the all-important vacation season final 12 months. Microsoft admits the plain in its earnings submitting: that the big drop was “driven by lower volume of consoles sold.”
Overall, gaming income is up 51 p.c, bolstered by the extra Activision Blizzard income, which contributed 55 factors of web impression. That means with out Activision Blizzard, Microsoft’s total gaming income would have truly declined this quarter. The newly acquired division recorded $1.97 billion in income throughout Q3, however the price of integration, transaction prices, and different prices of income all whole $980 million. With different working bills ($1.34 billion), it calculates to an total working lack of $350 million for Activision Blizzard.
Xbox content material and providers would have solely been up a single p.c with out Activision Blizzard, so it’s clear that this large buy is already having a big impression on Microsoft’s total gaming revenues.
Microsoft’s Office and cloud companies are as soon as once more the celebrities of the present, although. Office business merchandise and cloud providers income elevated 13 p.c 12 months over 12 months, and even workplace shopper is up 4 p.c in income. Microsoft 365 shopper subscribers are as much as 80.8 million now.
“This quarter Microsoft Cloud revenue was $35.1 billion, up 23% year over year, driven by strong execution by our sales teams and partners,” says Microsoft CFO Amy Hood. Server merchandise and cloud providers income at Microsoft is up 24 p.c because of a progress of 31 p.c 12 months over 12 months for Azure and different cloud providers.
Investors are additionally seeking to see indicators of income from Microsoft’s big AI investments over the previous 12 months, particularly on the Azure OpenAI facet, the place the corporate expenses companies to run AI duties within the cloud. Of the 31 p.c income progress for Azure and different cloud providers, income from AI providers contributed seven factors — an early indicator for Microsoft’s potential revenues in AI.
Microsoft will now maintain an earnings name at 5:30PM ET / 2:30PM PT, and we’ll replace this text with any related feedback from Hood or Microsoft CEO Satya Nadella.