Vole reported that its Xbox content and services revenue grew by 61 per cent year over year from the previous quarter, driven largely by “53 points of net impact from the Activision acquisition,” according to the company's press release.
However, hardware revenues saw a 29 per cent decline, possibly influenced by Microsoft's strategy to make its games more widely available beyond Xbox consoles.
In the quarter, Microsoft introduced a new Xbox Game Pass “Standard” tier and raised the Xbox Game Pass Ultimate price. This period it has marked the arrival of Call of Duty: Modern Warfare III on Xbox Game Pass, although it doesn't include the impact of Call of Duty: Black Ops 6, which launched last week.
Volish CEO Satya Nadella dubbed Black Ops 6 was the “biggest Call of Duty release ever” during the earnings call.
The company's Intelligent Cloud division also showed strong performance, with total revenues increasing by 20 per cent year over year to $24.1 billion, driven by Azure. Azure and other cloud services revenue was up 33 per cent, “including 12 points” from demand for its AI services.
The Productivity and Business Processes segment, which includes Office products, saw a 12 per cent increase year over year, reaching $28.3 billion in revenues.
Microsoft's OEM and Devices revenue now reported together, rose by two per cent. According to the company, this growth was attributed to “growth in Windows OEM” and was “partially offset by a decline in Devices. "
Like many other companies, Vole heavily invests in AI-focused features and tools, particularly to enhance Copilot. Nadella said,
“AI-driven transformation changes work, work artefacts, and workflow across every role, function, and business process. We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools to drive new growth and operating leverage,” he said.
He also mentioned that Microsoft's AI business is set to surpass an annual run rate of $10 billion this quarter.
Security remains a top priority for the company, which released a report in first quarter detailing its efforts. The quarter also saw Microsoft dealing with the aftermath of the Blue Screens of Death caused by the massive CrowdStrike outage.
These results highlight Microsoft's ongoing evolution and strategic shift towards AI and cloud services while navigating challenges in its hardware segment.
