How Surface and Xbox Helped Microsoft in 3Q18



New Surface devices are expected to be launched

Previously, we learned that Microsoft’s MPC (More Personal Computing) segment was boosted by double-digit Surface revenue growth in fiscal 3Q18. Microsoft’s (MSFT) Build developer conference, which begins on May 7, is expected to be a launch platform for new Surface devices. Its Surface Studio, Surface Book, Surface Laptop, and Surface Pro hardware are due for a refresh. Surface products, key constituents of the MPC segment, saw their revenue grow 32% to $1.1 billion, driven by the latest Surface Laptop gaining traction in the consumer and commercial space.

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Surface revenue grows 32%

The Surface Laptop is an entirely new hardware category. An LTE (long-term evolution) version of the Surface Pro was launched in late 2017.

Microsoft’s effort to establish Surface as both a tablet and PC (personal computer) is applauded by industry analysts, especially in the persistently sluggish market. According to Reuters, Nucleus Research analyst Rebecca Wettemann said Microsoft “refocused its efforts and catered to a productivity audience with a Surface that is both a tablet and a PC,” adding that “Apple (AAPL) is still playing catch up to that.” Microsoft’s focus on Surface indicates that although cloud and related technologies are still a priority for Microsoft, it is not moving away from its hardware business.

Gaming revenue and Xbox performance

In fiscal 3Q18, Microsoft’s gaming revenue grew 18%, fueled by Xbox software and third-party game sales. Xbox, which hit 59 million active users and saw 24% revenue growth in fiscal 3Q18, continues to be an integral part of Microsoft’s business.


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