Microsoft is driving the cloud, Office and Windows to sustained growth in Q3 2022

Microsoft’s third-quarter financial results for 2022 are here, and the company is showing another double-digit growth: $ 49.4 billion in revenue and $ 16.7 billion in net revenue. Revenue has increased 18 percent and the profit represents a jump of 8 percent year over year. Microsoft credits some of this quarter’s growth to the cloud, with server and cloud services revenue specifically increasing by 29 percent, and Microsoft Cloud up by 32 percent to $ 23.4 billion.

There was plenty of reason to believe that Microsoft would still have a smile this quarter. While the PC industry has begun to decline from its pandemic heights, it marked Chromebook sales – not Microsoft Windows machines – that were responsible for the entire recent decline. Meanwhile, the Xbox has just had its best sales in 11 years, beating the relatively limited supply PS5.

Sure enough, Microsoft says their “more personal computers,” including Windows and Xbox, rose 11 percent to $ 14.5 billion in Q3 – and “Windows OEM revenue growth”, which should include the price manufacturers pay to putting Windows 11 on the laptops and desktops you buy specifically increased by 11 percent. “Companies adopt [Windows 11] at a faster pace than any previous release, ”said CEO Satya Nadella at the earnings call.

Xbox hardware revenue rose 14 percent, with a 4 percent increase in Xbox content and services revenue “driven by growth in Xbox Game Pass subscriptions and first-party titles,” to a total 6 percent boost for gaming revenue to $ 3.74 billion . Nadella also boasted of taking gaming market share on the earnings call, saying 10 million people have now streamed games from Microsoft’s cloud – one of the first concrete figures we’ve had for the popularity of cloud gaming, as Google Stadia does not share numbers and Nvidia’s GeForce Now numbers includes anyone who has ever used its free trial. PlayStation Now had 3.2 million subscribers in May last year, but Sony recently decided to roll it into a major subscription service.

Xbox Game Pass subscribers also played 45 percent more over the past twelve months, Nadella said – adding up to “billions of hours” during the year.

We were also eager to see if Microsoft’s large Office and cloud companies also remained rosy as some employees return to physical offices, and the answer is definitely yes: 17 percent revenue growth in the “Productivity and Business Processes” segment this quarter, with Office up 12 percent and 11 percent in the business and consumer divisions, respectively. Office 365 now has 58.4 million consumer subscribers, an increase of 2 million over the last quarter and an increase of 8 million since this time last year. “Intelligent Cloud” revenue rose 26 percent overall to $ 19.1 billion.

And LinkedIn is still experiencing dramatic growth, an increase of 34 percent this quarter, after a growth of 37 percent, 42 percent and 46 percent the previous three quarters, respectively.

Microsoft’s Surface devices are also apparently doing well with a 13 percent increase in revenue after its revenue surprisingly increased by 8 percent in the last quarter (surprisingly because the company previously warned of a decline). 2022 is the 10th anniversary of Microsoft Surface, and we expect the company to have more up its sleeve than the sleek Surface Laptop SE and this fascinating and fancy teleconferencing camera.

Here is one picture with all the relative gains (and one loss) for Microsoft’s individual companies:

And here’s how much each of the named companies made in the last quarter in the form of dollars (note: measured in millions):

Microsoft’s acquisition of Activision Blizzard, which is set to make Microsoft the “third largest gaming company by revenue, behind Tencent and Sony,” was not included in this earnings – the deal is unlikely to close until next year.

Next quarter, Microsoft says it expects more revenue growth – though now single-digit growth in some companies – with “about $ 110 million in revenue impact and minimal impact on operating costs” from the war in Ukraine, and a note that Chinese production shutting down could affect Windows , Surface and Xbox hardware. Game revenue should actually fall, said Microsoft CFO Amy Hood, due to “lower engagement hours year over year as well as limited console supply.”