Microsoft just released its earnings for the three months ended March 31, 2023 (Q3 FY23), showing a steep decline in hardware sales and a slight dip in total gaming revenues.

Here’s what you need to know:

The Q3 numbers

Microsoft revenue: $52.9 billion (up 7% year-on-year)
Microsoft net income: $18.3 billion (up 9% year-on-year)

More Personal Computing (incl. Xbox) revenue: $13.26 billion (down 9% YoY)
Gaming revenue: Down 4%
Xbox content and services revenue: Up 3%
Xbox hardware revenue: Down 30%

The highlights

CEO Satya Nadella shared that revenue from gaming subscriptions reached nearly $1 billion within the quarter, with Game Pass extended to 40 new countries during that period.

He added that the firm has surpassed 500 million lifetime unique users across its first-party titles as well, and that the company has reached record numbers for a Q3 in terms of monthly active users when it comes to gaming.

CFO Amy Hood gave more details on the financial results within the gaming category, saying that the 4% decline in revenue was “ahead of expectations.”

“Xbox hardware revenue declined 30% and 28% in constant currency on a high prior year comparable that benefited from increased console supply,” she added.

It’s worth noting that, in Europe, Xbox Series X and S console sales were down 10% during the first quarter of the calendar year 2023.

As for the slight increase in Xbox content and services revenue, Hood said it was driven by “better-than-expected monetization in third-party and first-party content and growth in Xbox Game Pass.”

The 7% growth across the entire company was attributed to Microsoft Cloud in the context of the rise of AI (Microsoft Cloud revenue reached $28.5 billion and was up 22% year-on-year).

Looking ahead, Hood said she expected gaming to grow “in the mid- to high single digits” during Q4, adding: “We expect Xbox content services revenue growth in the low to mid-teens, driven by third-party and first-party content as well as Xbox Game Pass.”