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As consumers worked on Windows PCs during the pandemic and played games on their Xbox in the evening, Microsoft benefited from both trends. In a shift from prior quarters, Microsoft\u2019s More Personal Computing business, the home of Windows and Xbox, helped drive company growth.<\/p>\n
In its earnings call Wednesday, Microsoft reported that net income fell by 15 percent to $11.2 billion. However, second-quarter revenue jumped 13 percent from a year ago, to $38 billion. This was helped in part by a 14-percent increase in revenue for the MPC group, to $12.9 billion.<\/p>\n
There, the drivers were Microsoft\u2019s traditional consumer pillars: Windows, Surface, and Xbox. The first six months of 2020 have been affected by the coronavirus in most areas of the world, and Microsoft has struggled to sell pricier Windows 10 Pro licenses. In the recent quarter, Pro license sales actually fell, down 4 percent. But as consumers and businesses turned to cheaper PCs, Windows 10 \u201cnon-Pro\u201d (Windows 10 S and Windows 10 Home, mainly) grew 34 percent. Surface sales also recorded a strong quarter, jumping 28 percent to $1.72 billion.<\/p>\n
Microsoft attributed most of the growth in the More Personal Computing segment to gaming, specifically Xbox. Gaming revenue jumped a whopping 64 percent, consisting of a combination of console sales, games, and services. In fact, when console sales were excluded, the sales of games and services were slightly stronger, at 65 percent.<\/p>\n
It\u2019s becoming clearer that Microsoft views virtually all of its key businesses in two ways: as a platform upon which to build other apps and services, and an opportunity to sell those apps and services as an annuity, or subscription. Microsoft\u2019s most famous subscription is Microsoft 365, but the Xbox Game Pass is following that model, too.<\/p>\n
Though Microsoft helped drive the growth of the PC gaming community, \u201cgaming\u201d at Microsoft is still largely synonymous with the Xbox\u2014a platform against which to sell games. But Microsoft has also sold an \u201cannuity\u201d or subscription against it as part of the Xbox Game Pass. The $12.99 Game Pass Ultimate monthly subscription unlocks a Netflix-like array of games on the Xbox, and more recently the PC. Now, Microsoft is extending that platform to mobile, by making the Project xCloud remote-gaming technology part of Game Pass, too.\u00a0<\/p>\n
\u201cThe reason it\u2019s so exciting is that it has such platform strength, built on the support and the fans of the console,\u201d Microsoft chief financial officer Amy Hood said of the Xbox Game Pass. \u201cWe\u2019re extending that to the PC, we\u2019re extending that to mobile. That platform strength drives this more annuity-like behavior that we\u2019re thinking about, and we saw that in the Game Pass subscription growth this quarter.\u201d<\/p>\n
Satya Nadella, Microsoft\u2019s chief executive, said that the company\u2019s strategy in Xbox and especially Game Pass, was \u201cjust beginning\u201d to be built out.<\/p>\n