Microsoft‘s AI revenue surged 175% year-over-year to a $13 billion annual run rate, while its gaming hardware business saw significant declines, according to the company’s Q2 2025 earnings report released Tuesday. The tech giant reported overall revenue of $69.6 billion, up 12% from the previous year, with net income rising 10% to $24.1 billion.
Poll
Which Segment Do You Think Will Drive Tech Industry Growth in the Next 5 Years?
CEO Satya Nadella highlighted the company’s expanding artificial intelligence business during the earnings call, emphasizing Microsoft’s focus on helping customers “unlock the full ROI of AI.” The company’s cloud business also showed strong performance, with Azure and other cloud services growing 31% compared to the same quarter last year.
However, Microsoft’s gaming division presented a mixed picture. While Xbox content and services revenue increased by 2%, driven by Xbox Game Pass growth, gaming hardware revenue dropped 29%. Gaming revenue is expected to show single-digit growth, though Xbox hardware sales are predicted to continue declining year-over-year.
The company reported that Game Pass achieved a new quarterly revenue record, with cloud gaming reaching 140 million hours streamed during the quarter. Nadella revealed that the recently released “Indiana Jones and the Great Circle” has already attracted more than 4 million players.
Meanwhile, the Windows OEM and Devices revenue increased 4% for Q2 2025. Although, looking ahead, Microsoft CFO Amy Hood projected that Windows OEM and devices revenue will decline in the low to mid single digits in Q3 2025.
