Hardware falls 19% YoY but software and services sales are up 31 per cent

Microsoft has reported its "largest gaming revenue quarter ever". 

Despite waning hardware sales - a 19 per cent drop year-on-year compared to the same quarter last year - Microsoft's games revenue increased by 8 per cent YoY in its second fiscal quarter, with software and services sales, which increased by 31 per cent YoY, boosting Xbox revenue to $4.23 billion. 

"Our strong commercial cloud results reflect our deep and growing partnerships with leading companies in every industry including retail, financial services, and healthcare," said Nadella. "We are delivering differentiated value across the cloud and edge as we work to earn customer trust every day."

In the investors call, Nadella added Xbox Live MAUs have increased by 8 per cent to a record 64 million users across console, PC, and mobile combined to make "the highest number of mobile and PC users to date". Xbox Game Pass subscribers and Mixer uptake have also "hit new all-time highs".

"Our investments in content community and cloud services across every endpoint drove both record user engagement and record average revenue per user and contributed to our largest gaming revenue quarter ever, driven by software and services," Nadella added.

Overall Microsoft revenue was $32.5 billion - an increase of 12 per cent - and operating income was $10.3 billion - an increase of 18 per cent.

Microsoft recently announced it added Obsidian Entertainment and inXile to its portfolio of development studios. Obsidian is behind fan-favourite role-playing games like Pillars of Eternity, Fallout: New Vegas, and South Park: The Stick of Truth, while InXile created Torment: Tides of Numenera, The Bard's Tale 4 and Wasteland 2 and 3. Both studios have turned to crowdfunding in the past to secure financial support. This comes on the back of other acquisitions Microsoft publicised at E3 last year when it added no less than five new studios - Playground Games, Ninja Theory, Undead Labs, and Compulsion Games - to its first-party lineup, as well as establishing new studio, The Initiative.

"We're increasing our investment in our existing franchises you already love, and amplifying our investment into new worlds," Xbox's Phil Spencer said at the time. "We commit and harness our full resources of Microsoft to develop the future of play [...] We know exclusive games from Microsoft studios are originally what turned so many of us into Xbox fans."

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