Revenue increased $3.1 billion or 14%, due mainly to higher D&C Hardware and Commercial Licensing revenue.
Operating income increased $198 million or 3%, reflecting higher revenue, offset in part by higher cost of revenue and research and development expenses. Key changes in cost of revenue and operating expenses were:
• Cost of revenue increased $2.6 billion or 46%, primarily due to higher volumes of Xbox and Surface sold, as well as higher datacenter expenses.
• Research and development expenses increased $220 million or 9%, due mainly to increased investment in new products and services in our Devices and Studios and Applications and Services engineering groups.