Microsoft has reported its fourth-quarter financial results for the 2024 fiscal year, achieving $64.7 billion in total revenue and $22 billion in net income. The results represent a 15 percent year-over-year increase in revenue and a 10 percent rise in net income.
Cloud Revenue Drives Growth
The Intelligent Cloud division, which comprises server products and cloud services, saw a revenue increase to $28.5 billion, a 19 percent growth from the previous year. This segment now accounts for nearly 45 percent of Microsoft’s overall revenue.
However, the company continues to face difficulties in its consumer hardware division. Xbox hardware revenue has fallen, and Surface revenue has declined for the seventh quarter in a row.
Windows and Surface Revenue
Windows OEM revenue and the licensing fee from manufacturers increased by 4 percent year over year, which is in line with Gartner’s report of rising PC shipments for three consecutive quarters. Microsoft unveiled new Copilot+ PCs, the Surface Laptop 7th Edition and Surface Pro 11th Edition, late in Q4, and their full impact on revenue will be more apparent next quarter.
Devices revenue, formerly known as Surface revenue, dropped by 11 percent this quarter. The last uptick in Surface revenue was in Q1 FY23. Despite a hardware reorganization and introducing the Surface Pro 10 and Surface Laptop 6 for businesses, revenue hasn’t seen significant changes. CFO Amy Hood predicts a further decline in devices revenue next quarter but expects Windows OEM revenue to remain stable.
Xbox and Gaming
Xbox content and services revenue, which includes subscription services like Xbox Game Pass, increased by 61 percent this quarter. Activision Blizzard revenues played a major role here, accounting for 58 points of net impact. Without Activision Blizzard’s contribution, Microsoft’s content and services revenue would still have risen by 3 percent year over year.
Xbox Game Pass currently has 34 million subscribers, inclusive of Xbox Game Pass Core members. The company is set to introduce a new Xbox Game Pass Standard plan, replacing the Console version. Upcoming additions to the service include “Call of Duty: Modern Warfare III” and “Call of Duty: Black Ops 6”. Price adjustments for Xbox Game Pass Ultimate and PC Game Pass will commence in September, with Ultimate going up to $19.99 per month and PC Game Pass to $11.99 per month.
Despite new game additions, Xbox hardware revenue fell by 42 percent this quarter. Microsoft plans to release a disc-less model of the Xbox Series X in white and a Galaxy Black special edition later this year. The company is promoting its cloud streaming service, with no console required, and the Xbox TV app is now available on some Amazon Fire TV devices. Overall, gaming revenue rose by 44 percent due to Activision Blizzard. Without this acquisition, gaming revenue would have dropped by 4 percent.
Office and Cloud Services
Microsoft’s Office and cloud services continue to thrive. Office commercial products and cloud services saw a 12 percent increase, and Office 365 commercial revenue rose by 13 percent. On the consumer front, Office revenue grew by 3 percent year over year, and Microsoft 365 Consumer subscribers increased by 10 percent, reaching 82.5 million. LinkedIn revenue also increased by 10 percent this quarter.
Revenue from server products and cloud services grew by 21 percent, with Azure and other cloud services seeing a 29 percent rise. However, stock prices fell after hours on NASDAQ as analysts had anticipated higher Azure revenue.
Investors are closely monitoring revenue growth stemming from AI. AI services contributed eight points to the growth of Azure and other cloud services, slightly up from the previous quarter. Hood mentioned that AI is growing faster than total Azure revenue and anticipates further Azure growth in the latter half of fiscal 2025, driven by infrastructure investments and increased demand. For Q1 2025, Hood projects Azure revenue to grow by 28-29 percent.
Microsoft is granting employees a one-time cash award, ranging from 10-25 percent of their usual yearly bonus, as mentioned in an internal memo.
