Microsoft's Q2 2024 results show gaming revenues have surpassed Windows
What's the story
Microsoft's Q2 2024 financial results are now out.
The company clocked a revenue of $62 billion and a net income of $21.9 billion, marking an 18% increase in revenue and a 33% rise in net income, compared to the previous quarter.
For the first time, gaming revenues, boosted by the Activision Blizzard acquisition, have surpassed Windows, making gaming Microsoft's third-largest business segment this quarter.
Performance
Office and cloud revenue continue to dominate
Office and cloud revenue remain the main drivers of Microsoft's overall earnings, accounting for nearly 60%.
While Windows OEM revenue is recovering, Surface sales have declined this quarter.
Microsoft CFO Amy Hood mentioned during an earnings call that devices revenue was down by 9%, which was better than expected due to "stronger execution in the commercial segment."
Result
Activision Blizzard's acquisition had impact on gaming revenue
The Activision Blizzard acquisition has greatly impacted Microsoft's gaming unit, with revenue from Xbox content and services, increasing by 61%.
The acquisition's net impact amounts to just over $2 billion in revenue.
However, integration, transaction costs, as well as other expenses total $930 million, resulting in an operating loss of $440 million.
Despite the acquisition's completion, Microsoft axed 1,900 employees in its gaming division earlier this month.
Insights
Evaluation of AI integration
Microsoft's Office division continues to thrive, with business processes and productivity total revenue up by 13% year-over-year.
This growth is particularly driven by Office 365, which saw a 9% increase in commercial seat growth.
CEO Satya Nadella emphasized the company's focus on AI integration across its tech stack, stating, "We've moved from talking about AI to applying AI at scale."
AI services contributed six points to Azure and other cloud services' 30% YoY growth.
Facts
Microsoft's gaming and office revenues closely monitored
CFO Amy Hood anticipates overall gaming earnings to rise in the low 40% region, with 45 points attributed to Activision Blizzard.
This projection implies that the rest of Microsoft's gaming efforts revenue may decline next quarter.
For the Office division, Microsoft 365 Consumer subscribers have reached 78.4 million, a nearly 16% increase YoY.
Meanwhile, Office cloud services and commercial products revenue grew by 15%, thanks to a 17% growth in Office 365 Commercial earnings.