Microsoft's Entertainment And Devices Division, which includes its Xbox business, brought in $4.2 billion ($2.7 billion) in the three months to December 31, an increase of 15 per cent on the previous year.
Across Microsoft as a whole, revenue rose five per cent to $20.89 billion (£13.5 billion), setting a new record for the company. Net income, however, fell from last year's $6.63 billion to $6.62 billion (£4.28 billion).
Chief operating officer Kevin Turner said: "In addition to the continued strength of our commercial business, this holiday season was the strongest in Microsoft history, thanks to good sales execution and compelling products like Xbox 360 and Kinect.
"We are seeing a lot of excitement for new devices, from Windows 7 Ultrabooks to new Windows Phones, as well as growing anticipation for Windows 8."
The company repeated figures revealed at the Consumer Electronics Show earlier this month: the worldwide Xbox 360 installed base stands at 66 million, with 18 million Kinect sensors sold and Xbox Live membership rising by a third year on year, to 40 million.