Microsoft Q3 2023: Windows, devices, and Xbox down again

Microsoft just posted the third quarter of its 2023 fiscal financial results. The software maker made $TKTK billion in revenue and a net income of $52.9 billion during Q3. Revenue is up 7 percent, and net income has increased by 9 percent.

Microsoft had a tough quarter for Windows and devices revenue last quarter, and Q3 isn’t much different. Windows OEM revenue, the price that PC manufacturers pay Microsoft to put Windows on laptops and PCs, fell by 28 percent in Q3.

The PC market had a particularly bad quarter with both IDC and Canalys reporting that shipments of PCs and laptops were down around 30 percent year over year. The PC market woes have also hit Microsoft’s devices revenue, which includes HoloLens and PC accessories instead of just Surface revenue. Devices revenue has dropped by 30 percent in Q3.

The devices revenue doesn’t cover Microsoft’s Xbox efforts, though. That’s separated out into Xbox hardware revenue, which has dropped by 30 percent this quarter along with a slight increase of 3 percent in Xbox content and services revenue thanks to Xbox Game Pass growth. Overall, gaming revenue has declined 4 percent. Microsoft sold fewer Xbox Series S / X consoles over the holiday quarter than it did at higher prices in the same period in 2022, and it looks like that has continued into the most recent quarter.

Microsoft still isn’t providing an update on Xbox Game Pass subscriber numbers. Microsoft said Xbox Game Pass had grown to 25 million subscribers in January 2022, but we haven’t had an update for well over a year now. Microsoft Gaming CEO Phil Spencer revealed in October that Xbox Game Pass growth had stalled on the console side of the service, with Microsoft making a bigger push toward gains for PC Game Pass instead.

PC Game Pass launched in 40 new markets earlier this month, taking the total up to 86 countries that now have access to Game Pass. Microsoft is still looking to push Game Pass to mobile devices, and a key part of that is the company’s proposed $68.7 billion acquisition of Activision Blizzard.

Regulators in the UK are due to issue their final decision on the acquisition tomorrow morning after months of back-and-forth. It’s a key decision that will determine the future of this giant deal. The CMA has already sided with Microsoft over Call of Duty on PlayStation concerns, and the panel of experts conducting the investigation will now deliver their verdict on how the acquisition could affect the wider cloud gaming market. The EU is due to deliver its verdict on the deal next month, while the FTC has sued to try and block Microsoft from acquiring Activision Blizzard.