Written by Samah Labib Thursday, February 1, 2024 02:00 AM
Microsoft posted its second quarter 2024 financial results, and the software maker posted revenue of $62 billion and net income of $21.9 billion during the second quarter.
Revenues increased by 18% and net income increased by 33%. This is the first quarter in which it announces Microsoft Reporting its earnings as a $3 trillion company and also the first time the company announced additional revenue from its acquisition of Activision Blizzard, these additional revenues from gaming made Microsoft’s third largest business in the quarter after Windows.
Office and cloud revenues remain the highest, contributing about 60% of Microsoft’s total revenues. While Windows OEM revenues are rebounding again, hardware revenues from Surface sales continued to decline during the quarter.
Microsoft warned that hardware revenue will decline compared to this quarter, and was down 9%, and Microsoft CFO Amy Hood said in a phone call that this was better than the company expected, thanks to “stronger execution in the commercial segment, and hardware revenue is expected to decline again in Q3 2024, in low double digits.
Microsoft CEO Satya Nadella said last quarter that “PC market unit volumes were at roughly pre-pandemic levels,” so it’s possible that Surface simply hasn’t recovered as well.
This is despite Microsoft launching the new Surface Laptop Studio 2, Surface Laptop Go 3, and even Surface Go 4 late last year.
Microsoft’s hardware revenue also includes HoloLens and PC accessories, and revenue has been declining for more than 12 months now.
But performance Windows better. OEM revenue, which is the price computer makers pay Microsoft to put Windows on laptops and PCs, rose 11% during the quarter. Windows OEM revenue suffered throughout Microsoft’s entire 2023 fiscal year, but this now marks two straight quarters. of growth compared to five consecutive quarters of decline in hardware revenue.
Hood expects Windows OEM revenue to be “relatively flat” in the next quarter.
Speaking of hardware, all eyes are on Microsoft Gaming to see the company’s latest earnings, and Microsoft is now reporting Activision Blizzard’s revenue as part of its gaming unit, boosting overall revenue in Xbox content.
Xbox content and services revenue, which includes Xbox Game Pass, rose a whopping 61 percent, largely due to Activision Blizzard revenue, so it’s hard to immediately understand how Xbox would have fared without this giant addition.
Microsoft says the net impact from the Activision Blizzard acquisition is just over $2 billion in revenue, but the cost of integration, transaction costs and other revenue costs totals $930 million. Combined with other operating expenses ($1.59 billion), it results in an operating loss of $440 million.
While the Activision Blizzard acquisition was being completed, Microsoft laid off 1,900 workers in its gaming division earlier this month, mainly affecting Activision Blizzard employees. Microsoft has also overhauled its Xbox management in recent months and even appointed a new Blizzard president earlier this week.
2024-02-01 00:00:00
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