Microsoft Posts $21B In Revenue, Xbox May Beat Windows Revenues Soon

Yesterday afternoon both Google and Microsoft released quarterly earnings. Google posted its highest gross revenues to date but missed analysts’ Q4 expectations. Microsoft posted $20.89 billion in fiscal Q2 revenue (calendar Q4) and came in above analyst expectations.

Overall, Microsoft’s top-line was 5 percent above last year. All lines of business saw revenue growth vs. last year except Windows, which posted a decline. The following was the performance of the various divisions:

  • Microsoft Business Division (Office): $6.28 billion in second quarter revenue, a 3 percent increase vs last year
  • The Server & Tools business: $4.77 billion in second quarter revenue, an 11 percent increase vs last year
  • The Windows and Windows Live Division: $4.74 billion, a 6 percent decline vs last year
  • The Online Services Division (which includes Bing/ads): $784 million, a 10 percent increase vs last year
  • The Entertainment & Devices Division (XBox, mobile): $4.24 billion, an increase of 15 percent vs last year. Microsoft said that there are now 66 million Xbox 360 consoles and 18 million Kinect “sensors.”  Xbox LIVE has 40 million members globally.

Online services, which includes Bing, saw another loss ($458 million) though 18 percent narrower than a year ago. Its $784 million in revenue was a 10 percent increase vs last year. Online ad revenue grew 13 percent for Microsoft.

The 6 percent decline in Windows sales was largely attributed to softness in the PC consumer market (economy and “competing form factors”) and hard drive shortages caused by flooding in Thailand. Enterprise PC sales grew by comparison.

Historically Office and Windows have powered the company’s earnings, now Xbox/gaming is a third very solid division. Indeed, Entertainment & Devices revenue may come to exceed Windows in the coming quarters if PC softness continues.

Shifting consumer buying behavior, from PCs to “competing form factors” (i.e., tablets and smartphones), is at least partly responsible for the decline in Windows revenues. That consumer market shift is probably “secular,” though enterprise demand for PCs should continue to remain strong.

Microsoft will get another shot at the tablet market when new Windows 8 devices come out late this year. In terms of mobile there was no specific information provided in the earnings release or on the call.

Related Topics: Channel: Search Marketing | Microsoft | Microsoft: Bing | Microsoft: Business Issues | Microsoft: Mobile


About The Author: is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling.

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