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Physical Vapour Deposition (PVD) coating materials based on transition metal oxy-nitrides have been found to offer improved oxidation resistance for tooling applications. Arc deposited AlCrOxN1-x coatings were tested on M2 HSS drills in drilling 2.5D holes in AISI D2. At a speed of 30 m/min and feed 0.025 mm/rev the mean tool life was 17.2 holes /µm for coatings made with a N2/O2 ratio of 0.9/0.1. Coating deposition with a pulse bias of 10 kHz was found to improve tool life in the drilling test by 10% compared to DC bias coatings. In milling of stainless steel AlCrOxN1-x coated carbide end mills cutting AISI 316 at 70 m/min achieved a cut length 2.5X uncoated tools under the accelerated test conditions.