Microsoft reported second-quarter earnings that were boosted in part by its acquisition of game maker Activision Blizzard.
Total Xbox content and services revenue increased 61 percent year-over-year thanks to the acquisition of Activision Blizzard and total gaming revenue increased 49 percent. Total revenue for More Personal Computing, the segment that includes the financials from Activision Blizzard, was $16.9 billion, up 19 percent. The company set all-time records for monthly active users on Xbox, PC and mobile, which now more than 200 million monthly active users, including Activision Blizzard King.
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As of the second quarter, the net impact from Activision on Microsoft included $2 billion in revenue, however, the cost of revenue totaled $930 million and operating expenses total $1.59 billion, leading to an operating loss of $440 million. Next quarter, the company said it expects Activision Blizzard to continue driving revenue growth and for the unit to be accretive to its operating income for the full year, when excluding certain costs.
Total revenue at Microsoft was $62.0 billion, up 18 percent year-over-year, while net income was $21.9 billion, up 33 percent.
Microsoft closed its $68.7 billion transaction of the video game publisher in October 2023, 21 months after it had first announced the deal. The deal, which was the largest transaction in the history of Microsoft, makes it the world’s third-largest gaming company by revenue as it pairs Microsoft’s Xbox game platform alongside popular Activision games such as the Call of Duty, Diablo, Warcraft and Tony Hawk franchises.
As the company seeks to merge the two gaming forces, Microsoft announced the layoff Thursday of 1,900 employees or about 8 percent of the Microsoft Gaming workforce of about 22,000 employees.
Since its last earnings report in October, tech giant Microsoft has generated an uncharacteristic number of headlines related to its AI efforts, which CEO Satya Nadella also outlined in the second-quarter earnings as a key focus.
“We’ve moved from talking about AI to applying AI at scale,” said Satya Nadella, chairman and chief executive officer of Microsoft. “By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector.”
Microsoft and ChaptGPT-maker OpenAI (which is an exclusive partner of Microsoft) are facing a lawsuit from The New York Times for copyright infringement, in a suit alleging that articles published by The Times were used to train the chatbots and are now putting it in competition with the publication.
Nadella and his team were also briefly involved in the battle between OpenAI and its CEO Sam Altman and had announced their intent to hire Altman to lead AI efforts at Microsoft after Altman had been ousted by the board at OpenAI in November (Altman quickly returned to OpenAI, with a new board members in place).
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