Microsoft’s financials for its fiscal third quarter of 2023 are in, and the company reports $52.9 billion in revenue and a net income of $18.3 billion. This is a revenue growth of 7 percent and a net income increase of 9 percent. This represents a boost for the company following several quarters of falling year-on-year revenues.
For the fiscal third quarter, Microsoft reports its cloud and office businesses did well but Windows, Xbox, and Surface continue to fall.
Microsoft faced challenges in Windows and devices revenue last quarter, and Q3 shows a similar trend. Windows OEM revenue, the amount that Microsoft charges PC makers to install Windows on their devices, dropped by 28 percent in Q3. The PC market suffered a sharp decline with both IDC and Canalys estimating that PC and laptop shipments fell by around 30 percent year over year.
The PC market slump also affected Microsoft’s devices revenue, which includes HoloLens and PC accessories as well as Surface revenue. Devices revenue fell by 30 percent in Q3.
However, “PC demand was slightly better than we anticipated,” says Microsoft CFO Amy Hood in a call with investors today. Demand was stronger than expected in commercial, added Hood. Microsoft is projecting a similar quarter in Q4 fiscal 2023, where “Windows OEM and devices should both decrease in the low to mid 20s,” says Microsoft COO Amy Hood.
Microsoft is Struggling with Gaming Hardware
The devices revenue does not include Microsoft’s Xbox efforts, though. That’s categorized as Xbox hardware revenue separately and it fell by 30 percent this quarter along with a small increase of 3 percent in Xbox content and services revenue due to Xbox Game Pass growth. Overall, gaming revenue has dropped 4 percent.
Microsoft sold fewer Xbox Series S / X consoles during the holiday quarter than it did at higher prices in the same period in 2022, and it seems like that has continued into the most recent quarter. Microsoft attributes most of the Xbox hardware revenue decline to “higher console supply” during the same quarter last year.
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