Microsoft Q1 2021 earnings: Surface, Xbox, and cloud boost revenue

Microsoft posted the first quarter of its 2021 financial results today, reporting revenue of $37.2 billion and a net income of $13.9 billion. Revenue is up 12 percent, and net income has increased by 30 percent. While the ongoing pandemic continues to force many to work remotely during an economic downturn, Microsoft is benefiting from the shift in the way people are now working, playing games more, and connecting to others through videoconferencing.

Cloud services are the biggest boost to Microsoft’s revenues from the pandemic shift in behavior. Both Office commercial and consumer are up, with Office 365 Commercial revenue growth up by 21 percent. Microsoft 365 Consumer subscribers have also increased to 45.3 million. Server products and cloud services revenue has also increased 22 percent as more businesses rely on cloud services for remote working.

Cloud and Office aren’t the only products driving Microsoft’s growth, though. Surface revenue has jumped by 37 percent this quarter to $1.5 billion. That’s a big increase for a quarter that hasn’t seen any new Surface devices introduced. Microsoft only just introduced a new Surface Laptop Go device and updated Surface Pro X earlier this month, but those will count to next quarter’s revenue.

Microsoft’s next-gen Xbox consoles.
Photo by Tom Warren / The Verge

Over on the gaming side, Xbox content and services revenue has also increased significantly by 30 percent compared to the same quarter last year. A number of consumers have turned to gaming and services like xCloud or Game Pass during the pandemic, and it’s clear there’s an increased demand for Microsoft’s gaming services. Microsoft notes that Xbox Game Pass subscriptions, and strength in third-party and first-party titles helped with revenue.

Microsoft is now gearing up to launch its next-gen Xbox Series X and Series S consoles on November 10th. The consoles compliment Microsoft’s xCloud game streaming service that launched last month, and the company’s ongoing efforts with Xbox Game Pass. Microsoft revealed it has 15 million Xbox Game Pass subscribers last month, but the company hasn’t provided any fresh numbers today.

Surface Laptop Go.
Photo by Tom Warren / The Verge

Microsoft reported a jump in Windows usage earlier this year after lockdowns throughout many parts of the world led to remote working for many. This jump in usage hasn’t resulted in increased Windows OEM revenue during this quarter, though. Windows OEM revenue has dropped 5 percent, and Microsoft blames lower commercial demand for the dip.

While commercial demand for PCs might be softening, Windows OEM non-pro revenue has grown by 31 percent, thanks to consumer PC demand. It’s likely that students and families are driving this growth during the pandemic, turning to PCs to help support remote learning.

Developing…

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