Microsoft released their earnings report for the second quarter of fiscal 2019 today and while overall revenues were less than expected the Xbox business continues to show substantial growth.
Total gaming revenue for the quarter was $4.23 billion which represents an increase of 8% YoY. The largest growth came from Xbox software and services which shows a 31% YoY increase driven mainly from third party game sales. Monthly Active Users on Xbox Live totaled 64 million which is a YoY increase of 8%. To be clear, this number includes users on Xbox, Windows 10 and mobile devices. The only downside to the Xbox business for the quarter comes from hardware revenues which were down 19% YoY. This is attributed to increased console sales during the launch of the Xbox One X console. All of this pushes annual Xbox revenue to $11.5 billion for 2018 and the bulk of that comes from Xbox services and subscription growth.
It should be noted that Microsoft’s Xbox business has shown a pattern of revenue growth ever since 2017. That is the year when Phil Spencer was promoted to Vice President of Gaming and the Xbox division was freed from the shadow of the Windows team. You can see this for yourself in a tweet from industry analyst Daniel Ahmad:
Microsoft Gaming Revenue for the Holiday Quarter (Oct 1st – Dec 31st)
2014: $3.70 billion
2015: $3.60 billion
2016: $3.62 billion
2017: $3.92 billion
2018: $4.23 billion
— Daniel Ahmad (@ZhugeEX) January 30, 2019
Microsoft’s Azure cloud platform brought a whopping 76% increase in revenue growth YoY which demonstrates that the cloud is becoming an increasingly important tool for business and entertainment. Overall revenues are up 12% YoY which falls short of Wall Street expectations. As of this writing the price of Microsoft stock has dropped 4.12% during after hours trading. You can see the financial results for Xbox this time one year ago right here.