Office and Xbox lead to Microsoft's robust profits once again

Office and Xbox lead to Microsoft’s robust profits once again

Web Desk

25th Oct, 2023. 07:21 pm
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Office and Xbox lead to Microsoft's robust profits once again

Microsoft’s quarterly revenue increased by 13% to $56.5 billion.
Microsoft 365 consumer subscribers increased by 18% to 76.7 million.
Office commercial products and cloud services revenue increased by 15%.

Microsoft has recently disclosed its financial outcomes for Q1 of the 2024 fiscal year.

The software company earned $56.5 billion in Q1 revenue and a net income of $22.3 billion, marking a significant 13% revenue growth and an impressive 27% increase in net income. However, Microsoft’s device segment continued to face difficulties this quarter, even though the Windows division showed some signs of improvement.

Windows OEM Revenue

The star performers in Microsoft’s financial report are undoubtedly its cloud services and Office software suite. Interestingly, there was a 4% increase in Windows OEM revenue, which represents the fees PC manufacturers pay to Microsoft for installing Windows on computers, during this quarter.

This positive turn of events is unexpected, given the recent trend of slow PC sales in the past year, with Windows OEM revenue posing challenges throughout Microsoft’s entire 2023 fiscal year.

Hardware Revenue

Despite Windows showing signs of improvement, Microsoft’s hardware revenues are heading in a different direction. Reduced laptop sales have once again had a negative impact on device revenue, which includes items such as HoloLens, PC accessories, and Surface devices. Consequently, total device revenue has seen a significant 22% drop in Q1.

Xbox Revenue

Turning our attention to Xbox, there’s been a 7% decline in Xbox hardware sales. Even with the introduction of a new 1TB black edition of the Xbox Series S and the highly anticipated Starfield game from Bethesda, there was no substantial increase in Xbox hardware revenue.

But there’s a positive aspect in the form of Xbox content and service income, including products like Xbox Game Pass, which has recorded a strong 13% rise. The total gaming revenue has also shown a favorable increase of 9%. While it seems Xbox Game Pass has grown compared to the previous year, Microsoft has not disclosed the updated subscriber figures.

Cloud and Office Revenue

As is the usual pattern, Microsoft’s main sources of revenue growth continue to be its cloud, server, and office sectors. Microsoft 365 Consumer has experienced a notable 18% year-over-year rise, reaching a substantial 76.7 million subscribers. The launch of the new $1.99 per month Microsoft 365 Basic subscription earlier in the year has clearly played a role in this increase.

Additionally, revenue from Office commercial products and cloud services has experienced a strong 15% year-over-year expansion, primarily driven by the 18% growth in Office 365 commercial revenue. Microsoft’s continued approach of moving businesses to cloud-based Office solutions is proving successful, and the upcoming introduction of Microsoft 365 Copilot on November 1st is anticipated to generate even more interest in these offerings.

Teams and Azure Revenue

Microsoft Teams maintains its growth trend, boasting a substantial monthly active user base exceeding 320 million. It’s worth noting that Nadella revealed that over 10,000 paying customers have adopted Microsoft Teams Premium.

Microsoft’s intelligent cloud division delivered strong results, with $24.3 billion in quarterly revenue, representing a significant 19% growth compared to the previous year. Azure and other cloud services revenue showed impressive expansion, reaching 29%.