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Microsoft Office, cloud services, and Windows boost revenue in Q2

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Windows revenue has increased alongside a healthy PC market

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microsoft logo stock Photo by Sam Byford / The Verge

Microsoft posted the second quarter of its 2022 financial results today, reporting revenue of $51.7 billion and a net income of $18.8 billion. Revenue is up 20 percent, and net income has increased by 21 percent. Microsoft’s Office, cloud services, and Windows have all boosted the company’s revenues this quarter.

The PC market just had another big year thanks to continued pandemic demand, with around 340 million PCs shipped in 2021. This is now Microsoft’s second quarter of Windows 11, and Windows OEM revenue has increased by 25 percent in Q2, year over year. Windows Commercial products and cloud services revenue also increased 13 percent.

A user types on the Surface Pro 8 from behind. The screen displays the Windows 11 start menu on a white and blue background.
Microsoft’s Surface Pro 8.
Photo by Becca Farsace / The Verge

On an earnings call with investors, Microsoft CEO Satya Nadella said the company is seeing a “structural shift in PC demand,” and it’s “seeing a PC renaissance with increases in time spent on PCs and PCs per household.” Overall, Windows 10 and Windows 11 is now powering 1.4 billion monthly active devices.

Despite a healthier PC market, Microsoft did warn that Surface might take a hit this quarter, and it surprisingly didn’t. Surface revenue has increased 8 percent for Q2, just after the software giant launched its Surface Pro 8 and Surface Laptop Studio in October. Microsoft says its Surface revenue increase was driven by Surface Laptop.

2022 marks 10 years of Surface, and Microsoft is set to celebrate with multiple product refreshes throughout the year, according to sources familiar with the company’s plans. So far, we’ve seen a matte black version of the Surface Go 3, but we’re only a month into 2022.

Microsoft’s Xbox Series X / S consoles have been on sale for more than a year now, and hardware revenue is up 4 percent, thanks to continued demand for these new consoles. Microsoft’s overall gaming revenue is also up by 8 percent after the company set a record $3.6 billion for the quarter in its previous Q1 2022 earnings. Xbox content and services revenue also increased 10 percent year over year.

Xbox Series X / S consoles have been on sale for more than a year.
Photo by Vjeran Pavic / The Verge

Microsoft also revealed earlier this month that Xbox Game Pass has grown to 25 million subscribers, thanks to recent big releases like Halo Infinite and Forza Horizon 5. In 2021, Xbox Game Pass added iconic Bethesda games, with 20 in total on the service, including Dishonored, Doom, The Elder Scrolls, Fallout, and Wolfenstein.

During Microsoft’s earnings call, Nadella revealed that more than 20 million people have played Halo Infinite, “making it the biggest Halo launch in our history.” Nadella also revealed 18 million people have played Forza Horizon 5.

Microsoft is now looking ahead to its planned $68.7 billion acquisition of Activision Blizzard. The purchase is expected to close in fiscal year 2023, and it will see Microsoft publish franchises like Warcraft, Diablo, Overwatch, Call of Duty, and Candy Crush. Microsoft’s huge investment also means the company has formed a dedicated Microsoft Gaming division, with Phil Spencer taking over as CEO. This will now likely be reflected in Microsoft’s next quarterly earnings, where we might get some new insights into Microsoft’s growing gaming business.

microsoft word office stock
Office subscriptions are going well for Microsoft.

Elsewhere, Office has been performing well for Microsoft this quarter. Office commercial products and cloud services revenue is up 14 percent, and Office consumer is up 15 percent year over year. Microsoft 365 Consumer subscribers grew to 56.4 million, a surprising bump of nearly 20 percent year over year. It comes as Microsoft continues to try and tempt consumers over to Office subscriptions and products like Microsoft Teams.

Microsoft’s server products and cloud services revenue jumped 29 percent year over year, thanks largely to Azure and other cloud services revenue growing by 46 percent. Microsoft says this was driven by “strong demand for our consumption-based services.”

LinkedIn revenue was also up 37 percent year over year, driven by strong advertising demand. Microsoft says LinkedIn sessions have also grown by 22 percent, with “record engagement,” including more than 20,000 events. “LinkedIn has become one of the world’s largest platforms for professional events,” says Microsoft CEO Satya Nadella.

Search and news advertising revenue is also up by 32 percent year over year, thanks to more advertising spend.

During Microsoft’s earnings call today, Nadella also discussed his vision for the metaverse. “We feel very well positioned to be able to catch what I think is essentially the next wave of the internet,” says Nadella. “I think the next wave of the internet will be a more open world where people can build their own metaverse worlds, whether they’re organizations, game developers, or anyone else.”

Update, January 25th 6:30PM ET: Article updated with comments from Microsoft CEO Satya Nadella during the company’s investor call.