Microsoft Q2 2022 earnings: Windows, Xbox, and cloud boosts

Microsoft posted the second quarter of its 2022 financial results today, reporting revenue of $51.7 billion and a net income of $18.8 billion. Revenue is up 20 percent, and net income has increased by 21 percent.

The PC market just had another big year thanks to continued pandemic demand, with around 340 million PCs shipped in 2021. This is now Microsoft’s second quarter of Windows 11, and Windows OEM revenue has increased by 25 percent in Q2, year over year. Windows Commercial products and cloud services revenue also increased 13 percent.

Despite a healthier PC market, Microsoft did warn that Surface might take a hit this quarter, and it surprisingly didn’t. Surface revenue has increased 8 percent for Q2, just after the software giant launched its Surface Pro 8 and Surface Laptop Studio in October. Microsoft says its Surface revenue increase was driven by Surface Laptop.

2022 marks 10 years of Surface, and Microsoft is set to celebrate with multiple product refreshes throughout the year, according to sources familiar with the company’s plans. So far, we’ve seen a matte black version of the Surface Go 3, but we’re only a month into 2022.

Microsoft’s Xbox Series X / S consoles have been on sale for more than a year now, and hardware revenue is up 4 percent, thanks to continued demand for these new consoles. Microsoft’s overall gaming revenue is also up by 8 percent after the company set a record $3.6 billion for the quarter in its previous Q1 2022 earnings. Xbox content and services revenue also increased 10 percent year over year.

Photo by Vjeran Pavic / The Verge

Microsoft also revealed earlier this month that Xbox Game Pass has grown to 25 million subscribers, thanks to recent big releases like Halo Infinite and Forza Horizon 5. In 2021, Xbox Game Pass added iconic Bethesda games, with 20 in total on the service, including Dishonored, Doom, The Elder Scrolls, Fallout, and Wolfenstein.

Microsoft is now looking ahead to its planned $68.7 billion acquisition of Activision Blizzard. The purchase is expected to close in fiscal year 2023, and it will see Microsoft publish franchises like Warcraft, Diablo, Overwatch, Call of Duty, and Candy Crush. Microsoft’s huge investment also means the company has formed a dedicated Microsoft Gaming division, with Phil Spencer taking over as CEO. This will now likely be reflected in Microsoft’s next quarterly earnings, where we might get some new insights into Microsoft’s growing gaming business.

Elsewhere, Office has been performing well for Microsoft this quarter. Office commercial products and cloud services revenue is up 14 percent, and Office consumer is up 15 percent year over year. Microsoft 365 Consumer subscribers grew to 56.4 million, a surprising bump of nearly 20 percent year over year. It comes as Microsoft continues to try and tempt consumers over to Office subscriptions and products like Microsoft Teams.

Microsoft’s server products and cloud services revenue jumped 29 percent year over year, thanks largely to Azure and other cloud services revenue growing by 46 percent. Microsoft says this was driven by “strong demand for our consumption-based services.”

LinkedIn revenue was also up 37 percent year over year, driven by strong advertising demand. Microsoft says LinkedIn sessions have also grown by 22 percent, with “record engagement.” Search and news advertising revenue is also up by 32 percent year over year, thanks to more advertising spend.

Microsoft will now hold an investor call at 5:30PM ET / 3:30PM PT, and we’ll update this article with any relevant information.