Microsoft Soars in Cloud and Office, But Surface and Xbox Hardware Hit Hard in Q3

Microsoft’s latest financial results were a mixed bag. While the software giant saw strong growth in its core businesses like Office and cloud services, its hardware divisions – Surface and Xbox – continued to struggle.


  • Overall revenue grew 17% year-over-year to $61.9 billion.
  • Net income jumped 20% to $21.9 billion.
  • Office revenue surged 23%, driven by both commercial and consumer segments.
  • Microsoft Cloud revenue also rose 23%.

Cloud and Office Shine

Microsoft’s cloud business, Microsoft Azure, continues to be a major growth driver. Revenue from Office 365 subscriptions also saw healthy gains.

This strong performance demonstrates the ongoing demand for Microsoft’s productivity tools across businesses and consumers.

Surface Slumps

However, the news wasn’t so good for Microsoft’s hardware divisions. Surface device revenue dropped a significant 17% for the third quarter in a row.

This decline comes despite recent product launches and a shift in hardware strategy.

Microsoft is hoping to reverse this trend with the upcoming launch of “AI PCs” powered by Qualcomm’s latest chips, which will be unveiled at a special event on May 20th.

Xbox Struggles

The Xbox division also faced challenges. While Xbox content and services revenue, including Xbox Game Pass, grew 62%, this increase was largely driven by the recent acquisition of Activision Blizzard.

Xbox hardware sales, on the other hand, suffered a steep 31% decline following a weak holiday season.

Microsoft is attempting to expand its reach by making some popular Xbox titles available on rival platforms like PlayStation and Nintendo Switch.

Activision Blizzard Impact

The acquisition of Activision Blizzard is having a significant impact on Microsoft’s gaming business.

The newly acquired division contributed substantially to overall gaming revenue growth, but it also incurred integration and operating costs, resulting in an overall loss for Activision Blizzard in Q3.

Looking Ahead

Microsoft expects continued hardware struggles in Q4, with both Surface and Xbox hardware revenue projected to decline again.

Overall gaming revenue growth is still anticipated, but heavily reliant on Activision Blizzard’s contribution.

The focus remains on cloud and Office services, which continue to be Microsoft’s strongest performers.

Source: Theverge

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