Microsoft: a thunderous start to the year on the business side, except for the Xbox and Surface which continue to suffer

Microsoft has had a remarkable start to 2024, with revenues and profits up. The software giant is buoyed by the performance of its Office and Cloud activities, although the situation is not as bright for the Xbox and Surface branches.

The Redmond firm revealed impressive financial results for the third quarter of 2024. With a turnover of $61.9 billion (+17%) and a net profit of $21.9 billion (+20%), the company American is mainly driven by the solid performance of the Office and Microsoft Cloud segments, whose revenues continue to jump from one year to the next.

However, the picture is not as ideal as it seems for Microsoft. Xbox console sales fell noticeably this quarter, and Surface device revenue also declined… for the twelfth time in a row.

At Microsoft, almost all the lights are green

Once again, Microsoft’s activity is essentially driven by its Office and Cloud activities. Up 23% year-on-year, Microsoft Cloud’s turnover amounted to $35.1 billion in the last quarter, which represents more than half of the firm’s turnover. Cloud, powered in part by Azure, grew 31%, while commercial Office products grew 13%.

Microsoft’s investments in AI are also starting to pay off. As reported to us by The VergeAI services contributed to seven points of revenue growth for Azure and other services, representing an early indicator of Microsoft’s financial potential in this area.

Xbox and Surface branches lagging behind

Despite Microsoft’s strong overall performance, two key segments saw revenue declines: Xbox and Surface. Xbox hardware revenue fell 31% this quarter, while Surface device revenue declined 17% for the 12th consecutive quarter. Although Game Pass continues to grow, with now 34 million subscribers, this is not enough to offset the slowdown in Xbox console sales.

Microsoft recently ported four of its exclusive games to PlayStation and Nintendo Switch, which could be an attempt to drive Game Pass growth beyond the Xbox platform.

Microsoft expects a further decline in Xbox hardware revenues in the next quarter, according to Amy Hood, financial director at the company led by Satya Nadella. However, revenues from Xbox content and services should increase, in particular thanks to the recent acquisition of Activision Blizzard.

Surface’s struggles persist despite new device launches and a change in strategy. Microsoft recently named a new head of Windows and Surface, Pavan Davuluri, and brought the two groups under one leadership. Now, all that remains is to see if this new structure will turn things around.

Source : The Verge