Microsoft gaming revenue increases 61% as cloud and AI take center stage

[DragonSlayer101]

Recap: Microsoft's revenue grew 16 percent year-over-year to $65.6 billion in Q1 FY25, surpassing consensus analyst projections of $64.5 billion. Operating income rose 14 percent to $30.6 billion, while net income increased by 11 percent, reaching $24.7 billion. Diluted earnings per share climbed 10 percent to $3.30.

Key drivers of growth included cloud computing, AI, and gaming, even as traditional revenue streams like consumer software and hardware took a backseat. Microsoft's Intelligent Cloud division, encompassing Azure, grew 20 percent year-over-year to $24.1 billion, with the majority of gains from the commercial sector. Revenue from Microsoft 365 commercial products and cloud services increased by 13 percent, while consumer products and cloud services revenue rose a more modest five percent.

Source: App Economy Insights

A standout growth area this quarter was Xbox content and services, which surged by 61 percent YoY, largely due to the Activision acquisition. The gaming division also benefited from a price hike for Xbox Game Pass Ultimate and the release of Call of Duty: Modern Warfare III on Game Pass, both of which likely contributed to increased earnings.

Search and news advertising revenue grew by 18 percent, while LinkedIn revenue increased by 10 percent. Windows OEM and Devices revenue saw a marginal two percent increase; although Windows OEM showed some actual growth, Devices revenue declined compared to the previous year.

During the earnings call, CEO Satya Nadella emphasized Microsoft's commitment to AI, particularly in enhancing Copilot. He highlighted how the company is acquiring new AI customers by helping them "drive new growth and operating leverage." Nadella also announced that Microsoft's AI business is on track to exceed a $10 billion annual run rate this quarter.

The last quarter was a mixed bag for Microsoft. While its Intelligent Cloud division, AI, and gaming businesses generated substantial revenue, there were notable PR setbacks, including a widespread CrowdStrike outage that led to 8.5 million Windows devices crashing worldwide. This was due to a faulty CrowdStrike update, which affected less than one percent of all Windows machines globally but still caused major issues for retailers, banks, airlines, and their customers.

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Microsoft gaming revenue increases 61% as cloud and AI take center stage

 

[redgarl]

I was not expecting that...

 

[dangh]

They spend billions on Activision so they sell CoD now, started releasing games on playstation, so not surprising they increased their previous figures.

 

[brucek]

That 61% figure could be pretty misleading if you don't realize its the first time Microsoft could count Activision's revenue as its own. How much are Microsoft's revenues up (if any) over last period's Microsoft + Activision revenues?

 

[VemigoAmigo]

Xbox is doing worse than ever but Game Pass is doing better than ever.

Maybe Microsoft will allow 3rd party to build "PCs" to replace Xbox soon, and still push Game Passes out that way.

Personally I think Game Pass on Windows is crap, due to the games being locked down (no mod support, no config editing etc.) also many of the games on Game Pass lacks features compared to the regular version.

Lets see if we will get a new Xbox by 2026 as rumours say. I think it will be 100% digital if we do. Microsoft mostly just want to push Game Passes now.