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Earnings Release FY20 Q3

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Revenue increased $317 million or 3%.

Windows revenue increased $276 million or 6%, driven by growth in Windows Commercial. Windows Commercial revenue increased 17%, primarily driven by increased demand for Microsoft 365. Windows OEM revenue was relatively unchanged. Windows OEM Pro revenue grew 5%, driven by continued Windows 10 momentum, with demand from remote work and learn scenarios, offset in part by supply chain constraints in China. Windows OEM non-Pro revenue decreased 10%, driven by continued pressure in the entry-level category and supply chain constraints in China.

Search advertising revenue increased $75 million or 4%. Search advertising revenue, excluding traffic acquisition costs, increased 1%, with reduced advertising spend, particularly in the industries most impacted by COVID-19.

Surface revenue increased $11 million or 1%, driven by increased demand from remote work and learn scenarios, offset in part by supply chain constraints in China.

Gaming revenue decreased $14 million or 1%. Xbox hardware revenue decreased 20%, primarily due to a decrease in price of consoles sold. Xbox content and services revenue increased $33 million or 2%, primarily due to increased engagement following stay-at-home guidelines, offset in part by a high prior year comparable primarily from a third-party title.

Operating income increased $473 million or 15%.

Gross margin increased $386 million or 6%, driven by growth in Windows. Gross margin percentage increased, due to sales mix shift to higher margin businesses.

Operating expenses decreased $87 million or 3%, driven by the redeployment of engineering resources.

Gross margin and operating income each included an unfavorable foreign currency impact of 2%.

IMPORTANT NOTICE TO USERS (summary only, click here  for full text of notice); All information is unaudited unless otherwise noted or accompanied by an audit opinion and is subject to the more comprehensive information contained in our SEC reports and filings. We do not endorse third-party information. All information speaks as of the last fiscal quarter or year for which we have filed a Form 10-K or 10-Q, or for historical information the date or period expressly indicated in or with such information. We undertake no duty to update the information. Forward-looking statements are subject to risks and uncertainties described in our  Forms 10-Q and 10-K.

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Information contained in these documents is current as of the earnings date, and not restated for new accounting standards