Microsoft just reported Q4 revenue of the 2024 fiscal year. The tech giant reported a 15 percent increase in revenue during this quarter, totaling $64.7 billion in revenue with a net income of $22 billion during the final quarter.
The top earning product for Microsoft during Q4 was its Intelligent Cloud revenue, a package that includes Microsoft’s server products and cloud services.
This package now represents 45 percent of all of Microsoft’s revenue. But not everything is good news for Microsoft.
The company’s consumer device revenue continues to fall due to its flagship device, the Surface. Microsoft’s hardware performance is even worse considering it has dipped over the last seven consecutive quarters.
Microsoft’s hardware revenue crisis deepened in Q4
Microsoft is currently enduring a hardware sales crisis, as, in Q4 2024, Microsoft’s Surface revenue fell by 11 percent. The last time Microsoft’s Surface revenue was up was in Q1 of the 2023 fiscal year, which ended in September 2022.
The company launched two new Surface devices, the Laptop 7th edition and the Surface Pro 11th edition in June.
These devices are expected to perform well in terms of Microsoft’s revenue, but they will not count for Q4. Instead, the revenue these products generate is expected to be felt in the first fiscal quarter of 2025.
These devices come with Copilot Plus and the new Qualcomm chips, which are also expected to increase hardware sales for the tech giants.
It remains to be seen whether these new capabilities can successfully increase Surface revenue, given that the Surface Pro 10 and Laptop 6 were not significantly impactful.
“Hardware revenue will continue to decline in Q1 2025”
Microsoft’s CFO Amy Hood stated that the company’s hardware revenue would also decline and is expected to be in the “low to mid-single digits.”
The performance of Microsoft’s computers was poor, but the tech giant is being rescued in the service department by its game console, Xbox.
Xbox’s content and services—such as the Xbox Game Pass—have been up 61 percent in Q4 for Microsoft. Their newly acquired game studio, Activision Blizzard, carried the quarter with 58 points of net impact.
The company reported earlier in the year that its Xbox Game Pass subscription had grown to 34 million subscribers. The company aims to increase the number of subscribers by releasing the popular video game “Call of Duty: Black Ops 6” during the fall of 2024.
Despite Microsoft’s subscription services posting good revenue results for the company in Q4, Xbox hardware revenue is also unsatisfactory.
Microsoft‘s console revenue fell by 42 percent in Q4. This can be explained by the company’s strategic switch in marketing, choosing to focus their efforts on their “no Xbox required” service.
This service allows users to play cloud Xbox games on their Amazon Fire TV’s and the Xbox TV App. Despite this switch, Microsoft’s gaming department finished the fiscal year with an increase of 44 percent.
