Microsoft Q2 2023: Windows, devices, and Xbox down as cloud holds strong

Microsoft has just posted the second quarter of its 2023 fiscal financial results. The software maker made $52.7 billion in revenue and a net income of $16.4 billion during Q2. Revenue is up 2 percent, but net income has dropped by 12 percent. The results come just days after Microsoft announced 10,000 layoffs.

Microsoft previously forecast a tough quarter for Windows OEM revenue and hardware, and the results are clear on the state of the PC industry right now. PC shipments fell by 16 percent in 2022, according to analysis by Canalys, and Gartner reported a nearly 29 percent year-over-year drop in Q4 — the largest quarterly shipment decline since it began tracking the PC market in the mid-1990s. Microsoft’s Windows-related revenue has been hit hard as a result.

Windows OEM revenue, the price PC manufacturers pay Microsoft to put Windows on machines, fell by a massive 39 percent in Q2. Microsoft says this was driven by “continued PC market weakness and a strong prior year comparable.”

The Surface Pro 9 in laptop mode.

Surface Pro 9.
Photo by Amelia Holowaty Krales / The Verge

Gartner says the total amount of PC shipments in 2022 was close to pre-pandemic levels, so it’s clear the boom of laptop purchases is well and truly over. “Since many consumers already have relatively new PCs that were purchased during the pandemic, a lack of affordability is superseding any motivation to buy, causing consumer PC demand to drop to its lowest level in years,” says Mikako Kitagawa, director analyst at Gartner.

“While the number of PCs shipped declined during the quarter, returning to pre-pandemic levels, usage intensity of Windows continues to be higher than pre-pandemic, with time spent per PC up nearly 10 percent,” says Microsoft CEO Satya Nadella in an earnings call today.

This deterioration in the PC market has

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