Microsoft has posted a 14 per cent drop in profits for the September quarter, driven by a “continued deterioration in the PC market.”

Microsoft posted $50.1 billion in revenue (A$78.48), up 11 per cent year-on-year, however net income was $17.6 billion (A$27.57 billion), marking a 14 per cent fall from first quarter FY22.

Microsoft’s Windows OEM revenue, the revenue third-party PC manufacturers pay Microsoft to put Windows on machines, was down 15 per cent for the quarter, slightly ahead of the 19.5 per cent drop in global PC shipments for the quarter.

“Despite the drop in PC shipments during the quarter, Windows continues to see usage growth,” Microsoft CEO Satya Nadella assured investors on an earnings call, noting there are nearly 20 per cent more monthly active Windows devices than pre-pandemic.

Microsoft’s cloud revenue was the big earner this quarter, reaching A$40.2 billion in revenue, up 24 per cent.

Microsoft 365 consumer subscriptions are up 13 percent, to 61.3 million. Both Office commercial and consumer product divisions were up 7 percent, with Microsoft’s productivity business hitting A$25.8 billion in revenue.

LinkedIn revenue up 17 percent year over year, while search and news advertising revenue is up 16 percent, “driven by higher search volume and Xandr.”

Surface revenue, now bundled with HoloLens and PC accessories, under ‘devices revenue’, was up a modest 2 per cent.

The company saw a leap in hardware revenue, with Xbox earnings up 13 per cent, despite a 3 per cent drop in Xbox content and services revenue, driven by “declines in first-party content and in third-party content, with lower engagement hours and higher monetisation, particularly offset by growth in Xbox Game Pass subscriptions,” according to Microsoft.

“In gaming, we saw usage growth across all platforms, driven by strength off console,” says Nadella.

“PC Game Pass subscriptions increased 159 percent year over year.”

Nadella was silent on Microsoft’s pending A$107.5 billion acquisition of Activision Blizzard, which is expected to close this financial year.

Last month the company simply stated the deal was “progressing in line with the expected regulatory schedule and process, and we remain confident that the acquisition will close in fiscal year 2023.”