NIX Solutions: Microsoft’s Q4 Fiscal 2024 Report

Microsoft published its Q4 fiscal 2024 results, ending June 30, reporting $67.7 billion in revenue and $22 billion in net profit, corresponding to growth rates of 15% and 10%, respectively. The Intelligent Cloud segment, including server products and cloud services, demonstrated a significant revenue increase of 19% year-on-year, reaching $28.5 billion and accounting for nearly 45% of Microsoft’s total revenue. Conversely, the consumer device segment faced challenges, with continued declines in Xbox hardware and Surface device sales. Notably, revenue from Windows OEMs grew by 4% year-on-year, reflecting an upward trend in PC shipments for three consecutive quarters, as noted by Gartner analysts.

Product Segment Performance

In Q4, Microsoft launched a new segment of Copilot Plus PC devices, with Qualcomm chip-based laptops, Surface Pro 10, and Surface Laptop 7 hitting the market in June. The financial impact of these products may only become evident in the following quarter. Despite these launches, the Surface device revenue decreased by 11% during the reporting period. The last reported growth in this segment was in Q1 fiscal 2023. Microsoft anticipates continued declines in device sales revenue by low or mid-single-digit percentages in the upcoming quarter, while OEM Windows licensing revenue is expected to remain stable, aligned with the PC market, according to CFO Amy Hood.

NIX Solutions

Xbox content and services revenue, including Xbox Game Pass, experienced a substantial 61% year-on-year increase, significantly driven by Activision Blizzard’s contribution of 58 percentage points. Without this boost, the growth would have been a modest 3%. As of February, Xbox Game Pass subscribers reached 34 million, including Xbox Game Pass Core users. Microsoft plans to introduce Xbox Game Pass Standard for new console-owning subscribers soon. Recently, the Xbox Game Pass catalog expanded with last year’s Call of Duty: Modern Warfare 3, with Call of Duty: Black Ops 6 set to join by year-end.

In September, the prices for Xbox Game Pass Ultimate and PC Game Pass subscriptions are set to rise to $19.99 and $11.99, respectively. Despite this, Xbox hardware revenue fell by 42% over the last quarter. Upcoming releases include the Xbox Series X in white, without a disc drive, and a special edition Xbox Series X Galaxy Black. Cloud gaming is becoming increasingly prevalent within Microsoft’s ecosystem, with the Xbox TV app now available on select Amazon Fire TV models. Despite low Xbox hardware revenue, overall gaming revenue increased by 44%, largely due to Activision Blizzard’s 48 percentage point contribution; without it, the segment would have declined by 4%, notes NIX Solutions.

Growth in Cloud and Productivity Services

Microsoft’s cloud and productivity revenue continued to rise in Q4 fiscal 2024. Enterprise cloud and productivity revenue increased by 12%, with Office 365 revenue for businesses up by 13%. Consumer Office revenue grew by 3% year-on-year, with Microsoft 365 consumer subscribers increasing by 10% to 82.5 million. LinkedIn revenue saw a 10% rise during the reporting period. Server products and cloud services grew by 21%, while Azure and other cloud services achieved a 29% revenue increase. However, this growth fell short of analysts’ expectations, leading to a slight dip in Microsoft shares on the Nasdaq.

AI and Future Projections

Investors are keenly watching for signs of growth in Microsoft’s AI revenue. In the last quarter, AI contributed 8 percentage points to Azure’s revenue growth, a slight increase from the previous quarter. The AI segment is expanding faster than overall Azure revenue, according to CFO Amy Hood. Additional Azure growth is anticipated in the second half of fiscal 2025, driven by infrastructure investments and increasing demand. Azure revenue growth is projected to be around 28-29% in Q1 fiscal 2025. In light of a successful financial year, Microsoft announced additional bonuses of 10-25% of regular annual bonuses for its employees.

Microsoft’s Q4 fiscal 2024 results underscore strong growth in cloud services and productivity tools, offset by declines in hardware sales. As the company continues to innovate and adapt to market demands, we’ll keep you updated on its performance and strategic developments. Looking ahead, the focus on AI and cloud infrastructure investment will likely play a pivotal role in driving future growth.