Microsoft makes $24.7bn profit in Q1 after video game cutbacks
| Date | Type | Companies Involved | Key Datapoint |
|---|---|---|---|
| Nov 4, 2024 | report | Microsoft | $24.7 billion |
- Microsoft generated $65.6 billion in revenue during its Q1 FY2025
- Its games business increased to $5.6 billion
Tech conglomerate Microsoft generated $65.6 billion in revenue during the first quarter of its 2025 fiscal year, an increase of 16% year-on-year.
In its games business specifically, earnings rose from $3.9 billion last Q1 to $5.6 billion this time around - now including revenue from Activision Blizzard and King.
Overall operating income and profit also increased, the latter up 11% year-on-year and 10% in constant currency. Total profit for the quarter reached $24.7 billion, compared to $22.3 billion last Q1.
On the rise
Over the three months leading to September 30th, 2024, Microsoft made $30.6 billion in operating income at a 14% year-on-year increase.
The largest share of earnings came from the company’s Productivity and Business Processes, generating $28.3 billion during the quarter. Sales in the Intelligent Cloud sector brought in $24.1 billion, meanwhile Personal Computing accounted for $13.2 billion in revenue.
Microsoft Cloud was among the quarter’s biggest risers in constant currency reconciliation, up 22% in GAAP year-on-year. Azure and other cloud services rose by 33%.
The only category to outperform these was Xbox, up 61% in GAAP from last year across products and services.
Chief comments
"Strong execution by our sales teams and partners delivered a solid start to our fiscal year with Microsoft Cloud revenue of $38.9 billion, up 22% year-over-year," said Microsoft EVP and CFO Amy Hood.
"In gaming, revenue increased 43% and 44% in constant currency, with 43 points of net impact from the Activision acquisition. Results were ahead of expectations driven by stronger-than-expected performance in both first- and third-party content as well as consoles," she added in a call with investors.
"Xbox content and services revenue increased 61% with 53 points of net impact from the Activision acquisition."
Microsoft chairman and CEO Satya Nadella noted the impacts of AI on Microsoft’s business, "winning new customers" and helping them to apply artificial intelligence to "drive new growth".
Nadella also commented on games during the investor call: "One year since we closed our acquisition of Activision Blizzard King, we are focused on building a business positioned for long-term growth, driven by higher-margin content and services.
"You already see this transformation in our results, as we diversify the ways that gamers access our content. We set new records for monthly active users in the quarter, as more players than ever play our games across devices and on the Xbox platform.
"Last week’s launch of Black Ops 6 was the biggest Call of Duty release ever, setting a record for day one players, as well as Game Pass subscriber adds on launch day. And unit sales on PlayStation and Steam were also up over 60% year-over-year. This speaks to our strategy of meeting gamers where they are by enabling them to play more games across the screens they spend their time on."
Costs vs cutbacks
While the cost of revenue grew to $20.1 billion in Q1, Microsoft’s rising revenue overcame this and enabled that 11% increase in profits.
Even so, during the three-month period, Microsoft cut 650 jobs in its Xbox games division. Call of Duty Warzone: Mobile and Warcraft Rumble teams have both reportedly been affected.
Companies
