Microsoft has announced its quarterly results for the last quarter of 2024. This is the first time the Redmond giant has communicated results since its acquisition of Activision Blizzard, and it shows. Video games revenues have exploded and make the Xbox division one of the key components of the company’s strategy for years to come.
For its second fiscal quarter, Microsoft a 62 billion turnover Dollars and one 21.9 billion profit of dollars. Yes, you read that right. This is an increase of 18% and 33% respectively over the previous year.
At Microsoft, Office and the cloud (which includes Azure, for example) still act as driving forces. These two divisions alone contribute about 60% of the turnover. Office 365 subscribers now number 78.4 million worldwide.
The most anticipated moment of the conference was of course the division results Microsoft Gaming. The merger has been confirmed since last October and therefore Activision Blizzard is an integral part of the Xbox division. Content revenue (which includes games, Xbox Game Pass subscriptions and others) grew 61%. This is mostly due to Activision Blizzard, as Microsoft points out below (be careful, it’s not potable):
In the games sector, revenue grew 49% and 48% at constant currency, with a net impact of 44 points from the Activision acquisition. Total gaming revenue was in line with expectations, as Activision’s stronger-than-expected performance was offset by a weaker-than-expected console market, as we saw earlier. Xbox content and services revenue increased 61% and 60% on a constant currency basis, driven by a 55 point net impact from the Activision acquisition. Xbox hardware revenue increased 3% and 1% at constant currency.
Segment dollar gross margin increased 34% and 32% at constant currency, a net impact of 17 points from the Activision acquisition. Gross margin percentage increased approximately 6 points year-over-year, due to a combination of increased device gross margin and sales to higher margin businesses. Operating expenses increased 38%, including 48 points related to the Activision acquisition, partially offset by 6 points of favorable cost impact from the prior year second quarter. Operating profit rose 29% and 26% at constant exchange rates.
On the same side of the Xbox, the Hardware sales rose 3%. This pales in comparison when we look at the promotions put forward in Europe and the United States, especially during Black Friday where the Xbox Series X/S benefited from discounts of up to 25%.
Unfortunately, Microsoft isn’t releasing any details specific to Activision Blizzard. We don’t know what this means for Activision, Blizzard and King. We just learn that Microsoft’s gaming revenue increased by 49%Mainly thanks to Activision Blizzard’s higher than expected revenue.
However, the arrival of Activision Blizzard at Microsoft allows the Microsoft Gaming division to become the company’s third activity. Video games generated over $7 billion in revenue, more than Windows.
Microsoft CEO Satya Nadella took the stage to talk about the gaming division and Activision Blizzard. I suggest you find his words below:
This quarter, we set records for monthly active users across Xbox, PC and mobile, where we now have more than 200 million monthly active users, including Activision Blizzard King.
With our acquisition, we have added millions of players to our ecosystem, as we realize our ambition to reach more players on more platforms.
With cloud gaming, we continue to innovate to give gamers more ways to experience the games they love, where, when and how they want. Streaming hours grew 44% year-over-year.
Quality content is key to our growth, and across our entire portfolio, I’ve never been more excited about our upcoming game lineup.
Earlier this month, we shared some exciting new titles coming to Xbox, PC and Game Pass this year, including Indiana Jones.
We announced the launch of major updates for the current year in our most enduring franchises that attract millions of players every month, including Call of Duty, Elder Scrolls Online and Starfield.
In conclusion, we look forward to seeing how AI-driven transformation will benefit people and organizations in 2024.
It should be noted that sales of the device have been at half mast for a year. Products like Surface, HoloLens as well as PC peripherals and accessories sold less with a decline of 9%. But, as always, it’s better than expected and Microsoft is turning this into good news.
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