Water leak from above windows created bubbles. I stripped the damaged section with putty knife, did I go too far? What steps should I take next? I'm new at this, I think I'm supposed to add primer and then a coat of paint.
Here is the over kill but guaranteed way to fix this. There are steps you can skip, but the paint may crack/peel/bubble/not stick if you do. Water damaged gypsum board can be tricky.
Remove any loose material. Lightly sand. Apply Zinsser Gardz. Allow to dry and lightly sand. Patch/skim with spackle/mud. Allow to dry and lightly sand. Repeat application of spackle/mud and light sanding if necessary to achieve acceptable finish level. Apply Zinsser Gardz. Allow to dry and lightly sand. Finish with 2 coats of normal paint.
Did you go too far? I don't think you did. It is best to remove the loose material. I would use some topping compound and fill the area and lightly sand. This will give a normal look. If you just prime and paint it will be visible for years. I use topping mud where I need a thin coat. It sands easier then prime and repaint and you will have a professional looking repair.