Microsoft’s Q3 report shows slight Xbox growth as fresh price hikes loom

Microsoft continues to focus on the cloud and integrating AI across Xbox amid news of new console pricing changes, as shown in the company‛s third quarter report for the 2025 fiscal year, covering the period ending March 31, 2025.

Intelligent cloud, which includes the cloud computing platform Azure, saw $26.8 billion in revenue, totaling a 21 percent increase. For Azure and “other cloud services,” the revenue growth was 33 percent, including “16 points from AI services,” as explained by chief financial officer Amy Hood during the conference call.

The total figure towers over the $13.4 billion revenue of more personal computing, which includes games and related services. For the video game business specifically, revenue increased 5 percent and 6 percent in constant currency, with Xbox content and services seeing revenue growth of 8 percent and 9 percent in constant currency.

The company highlighted ending the quarter as the “top publisher by pre-orders and pre-installs” across Xbox and the PlayStation store, although it didn‛t share specific numbers. For Game Pass, revenue increased over 45 percent year-over-year on PC, and people played over 150 million hours using cloud gaming.

Microsoft also dedicated time to mention how it‛s “integrating AI across Xbox,” with examples including a generative AI model (meant to assist game developers) announced in February, as well as the AI-powered Copilot tool (meant to assist players). As with the initial announcement from a few months back, the company didn‛t explain exactly how each AI integration will manifest, nor the specific benefits or use cases for each.

Related:Xbox is increasing hardware prices and bumping first-party titles to $80

A Minecraft Movie also received a shout-out as part of “monetizing our IP in new ways,” which grossed $550 million globally in under two weeks since its premiere. Microsoft also saw a 75 percent-plus increase in Minecraft weekly active users year-over-year since the movie’s release in early April.

Earlier today, the company announced an increase in hardware prices—which includes consoles, controllers, and some accessories—as well as some first-party titles costing $80 starting this holiday season. Looking back to previous figures shows that this move follows a Q2 decline in Xbox hardware sales, which itself continues a similar trend from Q1.

Revenue after a year of rampant layoffs and an active boycott

Throughout 2024, more developers under the Microsoft umbrella banded together amidst rampant layoffs. Both Microsoft and subsidiary Activision Blizzard were accused of “bad faith bargaining” by Raven Software union workers, while Activision Blizzard quality assurance workers rallied against a mandate to return to office. Bethesda Game Studios and World of Warcraft developers formed wall-to-wall unions, comprised of 241 and over 500 developers, respectively.

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The unions came together during a year in which Microsoft laid off around 2,550 people and shut down a handful of ZeniMax studios, including Arkane Austin, Alpha Dog Games, and Tango Gameworks.

“We continue to transform the business and focus on margin expansion, as we bring our games to over 500 million monthly active users across devices,” chairman and chief executive officer Satya Nadella said during the Q3 conference call.

Microsoft has, and continues to face, pressure from the current state of global events. Azure cloud and AI services are two of the services that have drawn the ire of the Palestinian-led Boycott, Divestment, and Sanctions (BDS) campaign, where Microsoft is one of the main active targets. Last week, Tenderfoot Tactics developer Badru pulled the title from Xbox platforms in solidarity with the campaign. Microsoft employees also launched No Azure for Apartheid in 2024, pressuring the company to terminate all Azure contracts and partnerships with the Israeli military and government.

Related:‘We are frustrated:’ ZeniMax union workers continue to pressure Microsoft over contract negotiations

To summarize, the company shared the following figures: $70.1 billion in revenue (up 13% year-on-year), composed of $29.9 billion across productivity and business processes, $26.8 billion in intelligent cloud, and $13.4 billion in more personal computing. The latter takes into consideration Windows OEM pre-builds, usage from a third-party partnership in search, and revenue across Xbox games and services.