Strong Xbox sales, cloud, security services help Microsoft post double-digit revenue growth in Q3 2022

Microsoft has posted double-digit revenue growth in Q3 2022 (for the January to March period), with gaming in particular standing out as a key growth category for the company during this quarter. In an earnings call on Wednesday, April 27, Microsoft said that it was the “market leader” in next-generation consoles – such as the Sony PlayStation 5, Nintendo’s OLED version of the Switch, and Microsoft’s own Xbox Series X and S – in USA, Canada, UK and western Europe.

These sales boosted Xbox hardware revenue growth by 14% YoY, while Xbox content and services grew by 4% YoY.

The number of hours spent by gamers in the Microsoft ecosystem went up by 45% year on year (YoY), although the company didn’t disclose exactly how many hours did the gamers play for. However, it added that its cloud gaming products saw strong growth through the quarter – while over 10 million gamers streamed games through its Xbox Cloud Gaming feature, revenue from Azure gaming – the cloud integration and services it offers to developers – grew 66% YoY.

Interestingly, Microsoft’s strong performance in gaming comes as reports claimed that in March this year, the company saw the highest earnings from Xbox sales in eight years, and sold the highest number of Xbox units in 11 years.

Microsoft Cloud, meanwhile, crossed $23 billion in quarterly revenue and outpaced the company’s overall revenue growth rate to clock 32% YoY increase. In fact, cloud services accounted for over 46% of the company’s quarterly revenue in Q3 2022.

Along with Amazon (which as per reports has the highest market share among cloud platforms around the world), Google, IBM, Salesforce and Oracle, Microsoft is today one of the largest cloud computing services providers.

Data from Synergy Research Group from Q1 2021 stated that Microsoft Azure had the second largest market share among cloud service providers, with 20% of the global market using an Azure product.

Explaining the growth in Azure services, Satya Nadella, chief executive of Microsoft, said during the call, “We're building a distributed computing fabric across the cloud and the edge to help every organisation build, run and manage mission-critical workloads anywhere. This quarter, we helped more customers than ever, simplifying and accelerating their cloud migrations – and it's still early days.”

Nadella named companies such as Bridgestone, Lufthansa, Fujitsu and Boeing as some of the companies that have recently migrated their workflows to Azure from other platforms. He also added that Azure AI saw 86% YoY growth in usage among companies.

In terms of Windows, Microsoft said that Q3 2022 marked the eighth straight quarter of 100 million-plus PC shipments with Windows onboard. This coincides with personal computing revenue of $14.5 billion, up 11% YoY.

Talking about this growth, Nadella said, “In consumers, Windows is key to curating our content and services to help every person with their everyday tasks from browsing and searching to learning and gaming, and shopping, all with security and privacy built-in. We are seeing strong engagement with nearly 500 million monthly active users of our personalised content feed, Microsoft Start.”

Security has also been a key area for Microsoft in the past quarter. Nadella further added, “Multi-cloud, multi-platform support is central to our approach. In security, we're the only cloud provider with native multi-cloud protection for the industry's top three cloud platforms.”

He underlined that Microsoft’s security customers grew by 50% YoY to over 7,85,000 – with new clients including Heineken and Domino’s Pizza, among others.

Cloud services, strong Windows PC sales, gaming and security services were thus marked as the key business areas for Microsoft, which added up to $49.4 billion in quarterly revenue for the company – up by 18% YoY.