Microsoft reports sinking Xbox revenue as its cloud business climbs

Microsoft’s Xbox hardware revenue continues to tumble, with the company revealing a 33 percent decline as part of its earnings report released on Wednesday. Even though the rest of Microsoft’s consumer-focused division took a dip, the company’s cloud and productivity businesses continue to soar, driving the company toward $82.9 billion in revenue.

In addition to an executive shuffle, Microsoft has only pushed further into AI in recent months, with the company reporting $54.5 billion in revenue from its cloud business, marking a 29 percent year over year increase. “We are focused on delivering cloud and AI infrastructure and solutions that empower every business to eval-max their outcomes in the agentic computing era,” Microsoft CEO Satya Nadella said in the press release. “Our AI business surpassed an annual revenue run rate of $37 billion, up 123% year-over-year.” Revenue earned by Azure and other cloud services went up 40 percent.

Microsoft 365 Copilot saw growth as well, with paid seats jumping from 15 million in the previous quarter to 20 million. Microsoft has continued building out its productivity suite with new AI features, including the launch of “vibe working” features across Excel, Word, and PowerPoint. The company says Microsoft 365 consumer cloud revenue increased 33 percent during this quarter, while its commercial segment increased 19 percent.