In a significant shift in Microsoft's business landscape, gaming has now surpassed Windows in terms of revenue, which is a historic moment for the technology giant.
Microsoft reported this massive milestone in its quarterly financial results for the second quarter of the 2024 fiscal year, revealing that its video-game business, including the newly acquired Activision Blizzard, has brought in more revenue than its Windows division for the first time.
For the quarter ending December, Microsoft's gaming revenue surged by 50% to reach $7.1 billion. But it comes with a caveat. This increase includes more than $2 billion in revenue from Activision Blizzard, a game publisher that Microsoft acquired for $69 billion. The inclusion of Activision Blizzard's financial results marks the first time these figures have been incorporated into Microsoft's earnings.
In contrast, Windows revenue saw a 9.5% rise, totaling $5.3 billion for the same period. This growth, driven in part by an 11% increase in sales of Windows PCs, was not sufficient to keep pace with the significant boost in gaming revenue, particularly from the Activision acquisition.
Despite this, it's important to note that Windows still holds a profit advantage over gaming. For example, Activision is only contributing $2.08 billion in revenue, which translates to a modest $11 million profit after accounting for transition costs. These dynamics are part of the reason behind the recent job cuts in Microsoft's gaming division.