Microsoft recently released its first-quarter financial results for the 2024 fiscal year, which showed impressive growth in revenue and net income. The company generated $56.5 billion in revenue and a net income of $22.3 billion during Q1. This marks a 13 percent increase in revenue and a 27 percent increase in net income compared to the previous year.
One of the standout performers for Microsoft was its cloud services and Office businesses. Microsoft 365 Consumer subscribers grew by a massive 18 percent year over year, reaching 76.7 million subscribers. The introduction of the new Microsoft 365 Basic subscription, priced at $1.99 a month, played a significant role in boosting the subscriber numbers. Additionally, Office 365 Commercial revenue grew by 18 percent, contributing to the overall growth of the Office commercial products and cloud services revenue, which increased by 15 percent year over year.
Another area of success for Microsoft was its Windows OEM revenue. Despite the general weakness in PC sales over the past year, Windows OEM revenue increased by 4 percent in Q1. This unexpected growth may be attributed to larger Windows 11 deployments, as mentioned by Microsoft CEO Satya Nadella during the company’s earnings call. However, devices revenue, including HoloLens, PC accessories, and Surface devices, experienced a decline of 22 percent due to lower shipments of laptops.
The Xbox division had a mixed quarter, with Xbox hardware revenue dropping by 7 percent. The launch of the 1TB black version of the Xbox Series S did not have a significant impact on hardware revenues. However, Xbox content and services revenue, which includes Xbox Game Pass, increased by 13 percent. Overall gaming revenue also grew by 9 percent. Microsoft did not provide updated subscriber numbers for Xbox Game Pass but did mention that the launch of the game Starfield contributed to its growth.
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In the cloud services sector, Microsoft’s intelligent cloud business performed exceptionally well, generating $24.3 billion in revenue, a 19 percent year-over-year increase. Azure and other cloud services revenue grew by 29 percent. Nadella previously announced that Microsoft Cloud sales surpassed $110 billion in the 2023 fiscal year, with Azure accounting for more than 50 percent of this revenue for the first time.
Looking ahead, Microsoft is expecting a decline in devices revenue in the mid-teens for the next quarter. However, Windows OEM revenue is projected to grow in the mid to high single digits. The impact of Microsoft’s recent Activision Blizzard acquisition is yet to be seen, but the company anticipates bigger gaming revenues and increased Xbox content and services revenues in the coming quarters. Microsoft’s focus on AI, including the launch of Microsoft 365 Copilot, is also expected to contribute to future revenue growth.
Overall, Microsoft’s Q1 financial results reflect the company’s strong performance in its cloud services, Office, and Windows businesses. While devices revenue faced challenges, the growth in cloud services and Office subscriptions, as well as the resilience of Windows OEM revenue, contributed to a successful quarter for Microsoft. The company’s strategic acquisitions and focus on AI technologies indicate a promising outlook for future earnings.
