Microsoft just posted the fourth and final quarter of its 2023 fiscal financial results. The software maker made $56.2 billion in revenue and a net income of $20.1 billion during Q4. Revenue is up 8 percent, and net income has increased by 20 percent. As expected, Windows and devices revenue has been hit hard again this quarter, but Xbox has rebounded somewhat — at least on the content side. Microsoft’s cloud, office, and server businesses continue to make up for a weaker PC market.

Microsoft’s entire fiscal 2023 hasn’t been great for its Windows and devices revenue compared to fiscal 2022. Windows OEM revenue, the price that PC manufacturers pay Microsoft to put Windows on laptops and PCs, has dropped significantly for the entire fiscal year, or four quarters in a row. In Q4, that means Windows OEM revenue fell by 12 percent, which Microsoft says was “primarily driven by the PC market.”

Research firm IDC blames “macroeconomic headwinds, weak demand from both the consumer and commercial sectors, and a shift in IT budgets” for six consecutive quarters of contraction in the PC market. Lower shipments of laptops and PCs have also hit Microsoft’s devices revenues again. Devices at Microsoft includes HoloLens, PC accessories, and Surface devices. Overall devices revenue has dropped by 20 percent in Q4.

Microsoft also makes Xbox devices, which are separated from its other hardware. Xbox hardware revenue has dropped 13 percent in Q4, so it’s likely that Microsoft continues to suffer with hardware supplies and softer demand for its Xbox Series S / X consoles. Or it could be related to Microsoft’s long-term strategy and balancing the costs of hardware against content and cloud potential.

Xbox content and services revenue, which includes Xbox Game Pass, is up 5 percent, though. Overall gaming revenue is also up just 1 percent. This suggests that Xbox Game Pass has grown year over year, despite Microsoft still not providing updated subscriber numbers. Microsoft had expected low- to mid-teens for Xbox content and services revenue, so just 5 percent is a miss here. Microsoft CFO Amy Hood blamed the miss on “weakness in first-party and third-party content performance,” in an earnings call today.

Microsoft said Xbox Game Pass had grown to 25 million subscribers in January 2022, but we haven’t had an update for more than 18 months now. Microsoft Gaming CEO Phil Spencer did reveal in October that Xbox Game Pass growth had stalled on the console side of the service, though. Microsoft has been making a bigger effort with PC Game Pass growth instead, with PC Game Pass launching in 40 new markets earlier this year.

Microsoft CEO Satya Nadella didn’t offer any update on Xbox Game Pass subscriber numbers during an earnings call with investors today, either. Nadella did reveal that Microsoft set fourth quarter highs for Xbox monthly active users and record fourth quarter engagement across Xbox Game Pass, but without numbers this doesn’t really tell us much.

Microsoft CFO Amy Hood offered up some guidance for what to expect from the company’s Q1 2024 fiscal gaming performance. Xbox content and services should be up in the “mid to high single digits,” with overall gaming revenue expected to be up “mid single digits.” Hood didn’t offer up any guidance on Xbox hardware revenues in Q1 2024 fiscal, though.

Microsoft also recently adjusted its Xbox Game Pass pricing. Xbox Game Pass Ultimate has moved from $14.99 per month to $16.99 (€14.99 / £12.99). The base Xbox Game Pass for Console pricing has also been increased from $9.99 a month to $10.99 (€10.99 / £8.99). Microsoft has not changed its PC Game Pass pricing, though.

Microsoft also announced plans to end its Xbox Game Pass Friends & Family plan in August. The plan had spread to eight countries, but Microsoft acknowledged this was a “preview program” all along and will cease to exist on August 15th. There’s no sign if it will return at a later date.

A new Xbox Game Pass Core subscription will be available in September priced at $9.99 per month to replace Xbox Live Gold. It features multiplayer online gaming and a new small catalog of more than 25 games — including Gears 5, Forza Horizon 4, and Psychonauts 2.

Microsoft had been hoping to have finalized its Activision Blizzard acquisition by the end of its Q4 fiscal 2023, but the deal deadline has been extended until October 18th. “We continue to work through the regulatory approval process and remain confident about getting the deal done,” said Nadella during Microsoft’s earnings call.

Microsoft and Activision agreed to extend the deadline to allow both companies to negotiate with UK regulators on a change to the transaction that will allow the deal to close. The UK’s Competition and Markets Authority (CMA) blocked the deal over cloud concerns in April, just a day after Microsoft’s Q3 2023 earnings report. The EU went on to approve the deal with a key cloud gaming remedy in place.

As always, Microsoft’s cloud businesses are really driving the company’s revenue. Microsoft 365 Consumer subscribers have grown to 67 million, up from the 65.4 million reported in the previous quarter. Microsoft launched a new $1.99 a month Microsoft 365 Basic subscription earlier this year, which is clearly having some impact on numbers.

Office commercial products and cloud services revenue also grew by 12 percent year over year thanks to Office 365 Commercial revenue growth of 15 percent. Microsoft’s intelligent cloud business saw revenue of $24 billion this quarter, up 15 percent. A big part of that was down to Azure and other cloud services revenue growing by 26 percent this quarter, driven by what Microsoft describes as strong demand for its consumption-based services.

Surprisingly, Microsoft CEO Satya Nadella revealed on today’s earnings call that Microsoft Cloud sales passed $110 billion in the 2023 fiscal year, with Azure making up more than 50 percent of this revenue for the first time. A slide disclosed in the FTC v. Microsoft hearing revealed that Azure contributed around $34 billion in revenue for Microsoft’s 2022 fiscal year, and it’s likely that this disclosure prompted Microsoft to give a somewhat vague update on Azure revenue. Nadella also revealed that Azure OpenAI now has more than 11,000 customers and that more than 27,000 organizations are using GitHub Copilot.

Investors have been hoping to get an idea of Microsoft’s potential AI revenues, particularly after the company unveiled its steep Microsoft 365 Copilot pricing last week. But it’s still early days, and it’s difficult to say how much AI has impacted Microsoft’s revenues this quarter.

A number of Microsoft’s AI efforts are currently in preview, so the company hasn’t started disclosing revenue from those yet, as they’re limited to a small number of organizations. “We’re still early in our journey,” says James Ambrose, director of investor relations at Microsoft, in a call with The Verge. We should get a much better understanding of Microsoft’s AI revenue potentials once Microsoft 365 Copilot is available later this year and if Microsoft starts to discuss Azure OpenAI revenue.

Update, July 25th 6:10PM ET: Article updated with comments from Microsoft CEO Satya Nadella and Microsoft CFO Amy Hood.