Earnings Release FY21 Q2

More Personal Computing

Revenue increased $1.9 billion or 14%.

• Windows revenue increased $123 million or 2%, driven by growth in Windows Commercial. Windows Commercial products and cloud services revenue increased 10%, primarily driven by demand for Microsoft 365. Windows OEM revenue increased 1%, driven by consumer PC demand, on a strong prior year OEM Pro comparable that benefited from Windows 7 end of support. Windows OEM Pro revenue decreased 9% and Windows OEM non-Pro revenue grew 24%.

• Gaming revenue increased $1.7 billion or 51%, driven by growth in Xbox content and services and Xbox hardware. Xbox content and services revenue increased $998 million or 40%, driven by growth in third-party titles, Xbox Game Pass subscriptions, and first-party titles. Xbox hardware revenue increased 86%, driven by higher price of consoles sold due to the Xbox Series X|S launches.

• Surface revenue increased $69 million or 3%.

• Search advertising revenue increased slightly. Search advertising revenue, excluding traffic acquisition costs, increased 2%, primarily driven by higher search volume, offset in part by lower revenue per search.

Operating income increased $1.0 billion or 25%.

• Gross margin increased $771 million or 11%, driven by growth in Gaming and Windows. Gross margin percentage decreased, driven by sales mix shift to Gaming.

• Operating expenses decreased $275 million or 10%, driven by reductions in marketing and retail store expenses.

IMPORTANT NOTICE TO USERS (summary only, click here for full text of notice); All information is unaudited unless otherwise noted or accompanied by an audit opinion and is subject to the more comprehensive information contained in our SEC reports and filings. We do not endorse third-party information. All information speaks as of the last fiscal quarter or year for which we have filed a Form 10-K or 10-Q, or for historical information the date or period expressly indicated in or with such information. We undertake no duty to update the information. Forward-looking statements are subject to risks and uncertainties described in our Forms 10-Q and 10-K.