Xbox success bolsters Microsoft’s gaming dream

Samuel Mungadze
By Samuel Mungadze
Johannesburg, 27 Jan 2021
Satya Nadella, CEO of Microsoft.
Satya Nadella, CEO of Microsoft.

Bouyed by the success of Xbox Series X and Series S, Microsoft’s gaming unit surpassed $5 billion in revenue for the first time in the second quarter ended December, and the company says it aims to reach the world’s three billion gamers.

The technology company today released results for the quarter ended 31 December 2020, with CEO Satya Nadella saying the launch of the Xbox Series X and Series S was the most successful in Microsoft’s history, with the most devices sold in a launch month.

The Xbox success comes on the back of increased gaming interest by Microsoft. The company has been making moves to strengthen its position, with Reuters reporting Microsoft has expressed interest in buying the Warner Bros gaming unit.

Addressing analysts and media in an earnings conference call, Nadella said game developers are benefiting too, as they turn to the company to reach more players and scale their games using Microsoft’s cloud services.

“We exceeded $2 billion in revenue from third-party titles this quarter for the first time. We are gaining console share, as gamers recognise the value of our broader ecosystem. Xbox Live has more than 100 million monthly active users, while Game Pass now has 18 million subscribers.

“And, we are transforming how games are distributed, played and viewed, bringing cloud gaming in Game Pass to iOS devices and Windows PCs over the next few months.”

Nadella added that the company is pleased with the overall growth in its consumer subscriptions.

“With Game Pass and more than 47 million Microsoft 365 personal and family subscribers, we have a large and growing consumer subscription business. And we see significant growth opportunity in both these segments as they move to services and on-demand models.”

During the period under review, Microsoft’s revenue surged 17% to $43.1 billion, while diluted earnings per share spiked 34% and was at $2.03.

According to Nadella, it was a record quarter, driven by commercial cloud, which surpassed $16 billion in revenue, up 34% year-over-year.

“What we are witnessing is the dawn of a second wave of digital transformation sweeping every company and every industry. Digital capability is key to both resilience and growth.

“It’s no longer enough to just adopt technology. Businesses need to build their own technology to compete and grow. Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform.”

In the period, Microsoft’s Office commercial products and cloud services revenue increased 11% (up 9% in constant currency) driven by Office 365 commercial revenue growth of 21% (up 20% in constant currency).

Additionally, the company’s Office consumer products and cloud services revenue increased 7% (up 6% in constant currency), Microsoft 365 consumer subscribers rose to 47.5 million and LinkedIn revenue increased 23% (up 22% in constant currency).

“Dynamics products and cloud services revenue increased 21% (up 18% in constant currency) driven by Dynamics 365 revenue growth of 39% (up 37% in constant currency),” says the company.

Nadella briefly highlighted how Microsoft is innovating across almost every layer of the modern tech stack, starting with Azure.

“We’re building Azure as the world's computer to support organisations’ growing cloud needs.

“We're investing to bring our cloud services to more customers, announcing seven new data centre regions in Asia, Europe and Latin America, and adding support for top-secret classified workloads in the United States.

“We have always led in hybrid computing, and we are accelerating our innovation to meet customers where they are. Azure Stack HCI, now broadly available, helps businesses extend the power of the cloud to sovereign workloads.

“More than 1 000 customers now use Azure Arc to simplify hybrid management and run Azure services across on-premises, multi-cloud and at the edge.”

On data governance, Nadella said it is top of mind for every business leader and will grow into an important category on its own, as critical as any artificial intelligence or analytics category today.

“We are investing to participate in this growth. New Azure Purview provides an end-to-end view of an organisation’s data estate across on-premises, multi-cloud and SaaS apps that was previously impossible.”