{"id":727414,"date":"2026-01-29T00:20:16","date_gmt":"2026-01-29T00:20:16","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/727414\/"},"modified":"2026-01-29T00:20:16","modified_gmt":"2026-01-29T00:20:16","slug":"microsoft-reports-strong-cloud-earnings-in-q2-as-gaming-declines","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/727414\/","title":{"rendered":"Microsoft reports strong cloud earnings in Q2 as gaming declines"},"content":{"rendered":"

Microsoft just posted<\/a> the second quarter of its 2026 fiscal financial results. The software maker made $81.3 billion in revenue and a net income of $30.9 billion during Q3. Revenue is up 17 percent, and net income has increased by 23 percent.<\/p>\n

The holiday quarter saw PC shipments grow unexpectedly amid an ongoing RAM shortage. Microsoft\u2019s end of Windows 10 support<\/a> helped push PC shipments up, but IDC revealed<\/a> earlier this month that PC makers have also been aggressively pulling forward inventory to combat potential tariffs and ongoing global memory shortage.<\/p>\n

\"Microsoft\u2019s<\/a><\/p>\n

Microsoft\u2019s Surface Pro 12 device. Photo by Amelia Holowaty Krales \/ The Verge<\/p>\n

Microsoft\u2019s Windows OEM and devices revenue over this holiday period was up just 1 percent year-over-year. Businesses and consumers have clearly been upgrading PCs and laptops during the Windows 10 end of life period, because Windows OEM revenue on its own was up 5 percent. But this revenue was offset by a decline in devices revenue as Microsoft combines Surface revenue and Windows OEM revenue together now.<\/p>\n

Windows 11 also hit a big milestone in the quarter, hitting 1 billion users<\/a>. That\u2019s up 45 percent year-over-year, according to Microsoft CEO Satya Nadella. The end of support for Windows 10 undoubtedly fueled this growth, which has helped Windows 11 reach 1 billion users faster than Windows 10 did.<\/p>\n

Microsoft didn\u2019t announce any new Surface devices during the recent quarter, after launching both the 12-inch Surface Pro<\/a> and 13-inch Surface Laptop<\/a> in May last year. I would expect to hear more about new Surface devices in the spring.<\/p>\n

\"The<\/a><\/p>\n

The Xbox Series S \/ X consoles. Photo by Vjeran Pavic \/ The Verge<\/p>\n

Microsoft\u2019s Xbox hardware revenue has declined for three financial years in a row, and it looks like those declining revenues are going to continue throughout fiscal 2026. Xbox hardware revenue was down 32 percent year-over-year during the recent holiday quarter. Overall gaming revenue was also down 9 percent.<\/p>\n

Xbox content and services, which includes Game Pass, is down 5 percent, too. This decline is largely being attributed to stronger first-party content performance in the previous year, and not the Game Pass Ultimate price hike<\/a> during the quarter. That points towards softer sales numbers for Call of Duty: Black Ops 7, which not only had to go up against Battlefield 6, but also the success of Black Ops 6 in 2024.<\/p>\n

Unsurprisingly, Microsoft isn\u2019t giving us an update on Xbox Game Pass subscriber numbers. The company last reported it had 34 million subscribers<\/a> nearly two years ago, which included Xbox Game Pass Essential (previously Xbox Live Gold \/ Game Pass Core) members.<\/p>\n

Microsoft has continued to publish more games on PS5, as part of its strategy to make previously Xbox-exclusive games available on Nintendo and Sony platforms. Microsoft revealed last year that Halo: Campaign Evolved<\/a> is coming to PS5 and Xbox in 2026, and Fable<\/a> and Forza Horizon 6<\/a> are also coming to Sony\u2019s console this year.<\/p>\n

\"Microsoft\u2019s<\/a><\/p>\n

Microsoft\u2019s new Maia 200 chip. Image: Microsoft<\/p>\n

Microsoft\u2019s cloud revenue was once again strong this quarter, and even crossed $50 billion overall \u2014 up 26 percent year-over-year. Azure and other cloud services revenue grew 39 percent.\u201c Microsoft Cloud revenue crossed $50 billion this quarter, reflecting the strong demand for our portfolio of services,\u201d says Microsoft CFO Amy Hood. \u201cWe exceeded expectations across revenue, operating income, and earnings per share.\u201d<\/p>\n

All eyes are still on Microsoft\u2019s AI revenues and the associated costs, and the software maker hasn\u2019t pulled out any specific AI product numbers this quarter. Capital expenditure in Q2 was $37.5 billion, and the majority of that spend was on assets like CPU and GPUs to fuel cloud and AI data centers. Commercial bookings have also increased 230 percent year-over-year, thanks to Azure commitments from OpenAI and Anthropic.<\/p>\n

Microsoft announced its latest in-house AI chip this week<\/a>, which will help host GPT-5.2 and other models for Microsoft Foundry and Microsoft 365 Copilot. The Maia 200 chip is designed for large-scale AI workloads and will go head-to-head with similar AI inference chips from Amazon and Google.<\/p>\n

Microsoft also saw Microsoft 365 consumer cloud revenue growth of 29 percent year-over-year, alongside Microsoft 365 commercial cloud revenue growth of 17 percent. LinkedIn revenue also grew by 11 percent year-over-year.<\/p>\n

The strength of Microsoft\u2019s Intelligent Cloud business, which includes Azure and server products, really shines a bright light on the decline of the More Personal Computing business of Windows, Xbox, and Surface. Intelligent Cloud contributed $32.9 billion in revenue this quarter, more than double the $14.3 billion from More Personal Computing. In fact, the More Personal Computing division declined by 3 percent in revenue year-over-year, the only business unit to do so this quarter.<\/p>\n

Microsoft blames that More Personal Computing decline on gaming, and it was offset by search and news advertising revenues growing by 10 percent and Windows OEM growth.<\/p>\n

Update, January 28th<\/strong>: Article updated with comments from Microsoft CEO Satya Nadella.<\/p>\n

Follow topics and authors<\/strong> from this story to see more like this in your personalized homepage feed and to receive email updates.<\/p>\n