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Xbox and Cloud Propel Microsoft's Q1 2024 Earnings Forward

By Xueyang
Oct. 26, 2023 updated 07:32

Microsoft's Q1 2024 fiscal results display a promising trend, with revenues amounting to 56.5 billion USD and a net income of 22.3 billion USD. This translates to a 13% surge in revenue and a 27% rise in net income. While the PC market and Windows OEM revenue have shown a slight recovery, increasing by 4%, the true stars driving Microsoft's financial growth remain its cloud services, Office suite, and Xbox content.

The company's hardware segment has felt the pinch, with a 22% dip in Q1 revenue. Recent product launches like the Surface Laptop Studio 2 and Surface Go 4 are anticipated to reflect more significantly in the Q2 results. CEO Satya Nadella noted that despite the dip, PC market volumes have returned to nearly pre-pandemic levels.

The Xbox Series S and XThe Xbox Series S and X

On the gaming front, although Xbox hardware revenue has seen a 7% decrease, content and services revenue, including Xbox Game Pass, have jumped by 13%. Gaming revenue, in total, experienced a 9% rise. The launch of Bethesda's "Starfield" game seems to have set a record for Game Pass subscriptions on a single day, according to Nadella. However, exact subscriber numbers remain elusive, with the last update in January 2022 marking 25 million subscribers.

The close of the Activision Blizzard acquisition and an upcoming Xbox Partner Preview event promises exciting developments for the Xbox community. Announcements regarding game additions to Xbox Game Pass are eagerly awaited.

Unsurprisingly, Microsoft's cloud, server, and Office domains continue to fuel revenue growth. Microsoft 365 Consumer subscribers surged by 18% YoY, now totaling 76.7 million. The recent introduction of a 1.99 USD monthly Microsoft 365 Basic subscription seems to have given this growth a boost.

Microsoft Teams is still growingMicrosoft Teams is still growing

Revenue for Office commercial products and cloud services expanded by 15%, while the Microsoft 365 Copilot's launch is poised to reignite interest in the coming months. Microsoft Teams also flaunts impressive growth, boasting over 320 million monthly active users.

The intelligent cloud sector of Microsoft brought in 24.3 billion USD, marking a 19% YoY rise. Azure, a significant contributor, saw a 29% growth in revenue. Upcoming quarters are expected to shed light on the financial impacts of Microsoft 365 Copilot pricing and the Activision Blizzard acquisition.

In projections for fiscal Q2 2024, Microsoft anticipates gaming revenue to soar in the mid to high 40% range, and Xbox content and services revenue to escalate in the mid to high 50% range.

Source: The Verge