Microsoft's games revenue increased 8% in the second fiscal quarter, which CEO Satya Nadella declared as the "largest gaming revenue quarter" in the company's history.
In the three-month period ended December 31, 2018, Microsoft earned $4.23 billion in revenue from its games business -- an overall increase of 8% year-on-year.
That improvement did not come from hardware revenue, however. Hardware sales actually fell 19% over the same quarter last year, which hosted the launch of the Xbox One X.
Instead, Microsoft drew strength from software and services, which saw a 31% increase in revenue thanks to a combination of third-party sales, Game Pass subscribers, and Xbox Live users. In a call with investors, Microsoft CEO Satya Nadella confirmed that Xbox Live MAUs increased by 8% to reach a record 64 million people across console, PC and mobile.