D&C Hardware revenue increased $571 million or 41%, due primarily to $398 million or 45% higher Xbox Platform revenue as well as Surface revenue growth. Surface revenue was $494 million for the three months ended March 31, 2014. Xbox Platform revenue increased due to sales of Xbox One, which sells for a higher price than Xbox 360. We sold 2.0 million Xbox consoles during the third quarter of fiscal year 2014, compared with 1.3 million Xbox consoles during the third quarter of fiscal year 2013. Surface revenue increased due to a higher number of units sold.
D&C Hardware gross margin decreased $135 million or 34%, due to a $706 million or 70% increase in cost of revenue, offset in part by higher revenue. Xbox Platform cost of revenue increased $486 million, due mainly to higher volumes of consoles sold and higher costs associated with Xbox One. Surface cost of revenue was $539 million for the three months ended March 31, 2014, which increased due mainly to a higher number of units sold.