Activision Blizzard comes to the rescue of Xbox as cloud continues to boost Microsoft revenue

Microsoft closed the fourth and final quarter of fiscal year 2024 with revenue of $64.7 billion and profit of $22 billion, up 15% and 10% year-over-year, respectively. Despite this, the market was expecting a better performance from Azure, so the company’s stock is down around 3% after the market close. On the other hand, the addition of Activision Blizzard has allowed the Xbox division to increase its quarterly revenue by 44%. Without its contribution, it would have fallen by 4%.

We start by looking at Xbox, which saw its content and services revenue grow 61% year-over-year. This dramatic increase was driven by the acquisition of Activision Blizzard, which contributed a net impact of 58 points. Without the $68.7 billion purchase of this subsidiary, Xbox’s content and services revenue would have grown 3% year-over-year. Next quarter, we’ll start to see the impact of the Game Pass price increase, the launch of Xbox Game Pass Standard, and the addition of games like Modern Warfare III.

On the hardware side, quarterly revenue was down 42% from the same period last year. Microsoft plans to release a white Xbox Series X without a disc drive for €549 and a special Galaxy Black edition Xbox Series X with 2TB of internal storage for €649.

In total, the income gaming Microsoft’s revenues for the fourth quarter increased by 44%, a growth that is again explained by Activision Blizzard, whose impact was 48 points. In other words, without the acquisition of the company, revenues gaming Microsoft’s sales would have dropped 4% compared to the same period last year. The second half of the year will be especially important for this division, which in addition to digesting the changes in Game Pass will see the launch of Black Ops 6, World of Warcraft: The War Within, ARA: History Untold, Diablo IV: Vessel of Hatred, Avowed and Microsoft Flight Simulator 2024.

During the results presentation, Satya Nadella, CEO of Microsoft, has commented that its division gaming has more than 500 million monthly active users across all its platforms and services. He also highlighted that its content portfolio “has never been stronger.”

Among the other divisions, Intelligent Cloud stands out, with revenues of $28.5 billion, up 19% from a year ago, driven by Azure and other cloud services, which contribute 29% year-over-year to Microsoft’s coffers. Analysts had expected further growth in the division and Azure, which is why Microsoft’s stock is falling. Finally, it should be noted that Devices has experienced a year-over-year drop in revenue of 11%. Next quarter, this division should feel the impact of the new Surface Pro and Laptop, which are the first in the Copilot+ PC category.