FY23 Q1 - More Personal Computing Performance - Investor Relations

Earnings Release FY23 Q1

More Personal Computing

Revenue decreased slightly.

• Windows revenue decreased $361 million or 6% driven by a decrease in Windows OEM, offset in part by growth in Windows Commercial. Windows OEM revenue decreased 15% driven by continued deterioration in the PC market, offset in part by 5 points of positive impact from the prior year Windows 11 revenue deferral. Windows Commercial products and cloud services revenue increased 8% driven by demand for Microsoft 365.

• Search and news advertising revenue increased $272 million or 10%. Search and news advertising revenue excluding traffic acquisition costs increased 16% driven by higher search volume and Xandr.

• Devices revenue increased $34 million or 2%.

• Gaming revenue increased slightly driven by growth in Xbox hardware, offset in part by a decline in Xbox content and services. Xbox hardware revenue increased 13% driven by higher volume and price of consoles sold. Xbox content and services revenue decreased 3% driven by declines in first-party content and in third-party content, with lower engagement hours and higher rate of monetization, offset in part by growth in Xbox Game Pass subscriptions.

Operating income decreased $759 million or 15%.

• Gross margin decreased $688 million or 9% driven by declines in Windows and Gaming. Gross margin percentage decreased driven by sales mix shift to lower margin businesses.

• Operating expenses increased $71 million or 2% primarily driven by investments in Search and news advertising.

Revenue, gross margin, and operating income included an unfavorable foreign currency impact of 3%, 5%, and 6%, respectively. Operating expenses included a favorable foreign currency impact of 3%.

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.