Microsoft's first quarter 2025 results are in and the results show that Microsoft's software gaming sales are increasing significantly even though Xbox hardware sales are declining.
The company says its revenue from Xbox content and services increased 61 percent year over year compared to the previous quarter – a figure that was driven by “53 points of the net impact of the Activision acquisition,” according to the company's press release. However, hardware sales fell again, falling 29 percent this quarter, perhaps reflecting Microsoft's ongoing strategy to make its games more widely available than just Xbox consoles.
During the quarter, Microsoft unveiled its new Xbox Game Pass Standard tier and a price increase for Xbox Game Pass Ultimate. This was also added in the first quarter Call of Duty: Modern Warfare III on Xbox Game Pass, but this quarter does not include the impact of Call of Duty: Black Ops 6which was launched last week.
The company's Intelligent Cloud division was also a bright spot, with total revenue increasing 20 percent year-over-year to $24.1 billion, driven by Azure. Revenue from Azure and other cloud services rose 33 percent, “including 12 percentage points” due to demand for its AI services. Productivity and business processes, which includes Office products, rose 12 percent year-over-year to $28.3 billion.
Microsoft's OEM and device sales — now reported together — rose 2 percent. However, this number is due to “Windows OEM growth” and is “partially offset by a decline in devices,” Microsoft says.
Microsoft, like many other companies, is currently investing heavily in AI-focused features and tools, particularly to improve Copilot. “AI-driven transformation is transforming work, work artifacts and workflows across roles, functions and business processes,” Microsoft Chairman and CEO Satya Nadella said in a statement. “We are expanding our capabilities and attracting new customers by helping them use our AI platforms and tools to achieve new growth and operational leverage.”