Microsoft released its fiscal results for the fourth quarter of 2022 today, reporting sales of $51.9 billion and a net income of $16.7 billion. Revenue is up 12 percent, while net income is up just 2 percent. While sales increased, Microsoft’s key businesses, such as Windows and Xbox, began to decline.
The PC industry had been prospering during the epidemic, but shipments fell by over 13 percent in the most recent quarter, according to Gartner. The drop is the steepest in nine years, owing to geopolitical concerns, inflation, and ongoing supply chain issues.
Microsoft’s Windows OEM revenue, which is the amount PC manufacturers pay Microsoft to install Windows on their machines, declined 2% in the fourth quarter, owing to “production shutdowns and a weakening PC market,” according to Microsoft.
Despite the lower PC market, Surface is doing well commercially. Despite no major Surface releases during the quarter, Surface revenue climbed by 10%. “When it comes to overall demand right now, the consumer side is obviously decreasing down at a quicker pace, so when we think of the commercial strength on Surface, that’s where we get a little bit more support on that Surface [revenue] figure,” adds Goodenough.
Microsoft upgraded the small Surface Laptop Go in June with an 11th Gen Intel CPU, but we won’t see a larger refresh to the Surface series until the autumn. The surface will be 10 years old in 2022, so anticipate the customary autumn event for new gadgets.
All eyes are now focused on Intel’s expected price hikes for CPUs and processors, and how they may impact the PC industry. Later this year, Intel plans to raise the prices of its flagship CPUs and a broad variety of other processors, including Wi-Fi and other connected components.
On the Xbox side, hardware sales plummeted 11 percent, while content and services income declined 6 percent. Microsoft ascribed the decrease in services to “reduced engagement hours and monetization” in both first- and third-party games. Microsoft’s overall gaming revenue fell by 7% year on year.
Despite the quarterly hardware sales dip, Nadella claims that Microsoft has “been the market leader in North America among next-generation consoles for three quarters in a row.” Xbox also had its highest fiscal year ever in terms of sales, with roughly $16.2 billion in total revenue. However, according to Microsoft’s fiscal Q1 2023 estimate, gaming revenue and Xbox content and services revenue would both decline again next quarter.
Microsoft disclosed last quarter that 10 million individuals have used the company’s Xbox Cloud Gaming service, and that figure is sure to have risen now that Fortnite is the sole game available for free on the service. “To date, over 4 million individuals have streamed [Fortnite], including over 1 million who were new to our ecosystem,” Nadella said.
Microsoft has not offered an update on Xbox Game Pass users this quarter, despite the fact that the programme hit 25 million in January with the Christmas releases of Age of Empires IV, Forza Horizon 5, and Halo Infinite.
