![](\"https:\/\/www.thestreet.com\/.image\/NDA6MDAwMDAwMDAzMjI3MTM4\/inside-a-bestbuy-store-as-microsoft-launches-copilot-ai-laptops.jpg?profile=rss\")
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Most people don’t buy Windows. They buy a laptop, and Windows comes with it.<\/p>\n
That’s why Microsoft’s Windows numbers are really a read on the PC market. When people buy computers, Microsoft gets paid by the companies that make them.<\/p>\n
For decades, that was the heart of the business. Today it’s a much smaller piece, and it’s shrinking.<\/p>\n
You may have noticed why if you’ve shopped for a laptop lately. Prices have been creeping up as the memory chips inside them get more expensive.<\/p>\n
A few hundred dollars on a new computer is easy to put off. When millions of buyers make the same choice, it shows up in a company’s results.<\/p>\n
Now Microsoft’s own results show how much that is costing the company.<\/p>\n
Windows sales to PC makers dropped sharply<\/p>\n
Microsoft (MSFT) said revenue from Windows OEM and devices fell 22% in its fiscal first quarter, which ended Sept. 30, according to its earnings release.<\/p>\n
OEMs, or original equipment manufacturers, are the companies, such as HP (HPQ) and Dell (DELL), that install Windows on new computers.<\/p>\n
Gaming slipped, too. Xbox content and services revenue fell by 2%.<\/p>\n
Related: Microsoft drops $101.9 billion surprise as AI reshapes company<\/p>\n
Overall, Microsoft’s Devices and Consumer segment brought in $15.5 billion, down 3% from a year earlier.<\/p>\n
Not every consumer business is shrinking. Microsoft 365 consumer cloud revenue, which includes paid subscriptions for apps such as Word and Excel, rose 17%.<\/p>\n
That suggests people are still willing to pay monthly for software. They are just keeping the computers they already own.<\/p>\n
Microsoft’s Windows sales fell 22% as memory costs lifted PC prices, while Azure grew 48%.<\/p>\n
Jeff Greenberg \/ Getty Images<\/p>\n
Why fewer people are buying new PCs<\/p>\n
Microsoft saw this coming.<\/p>\n
In April, Chief Financial Officer Amy Hood said part of an expected Windows decline would come “from a lower PC market as prices increase due to memory cost,” Yahoo Finance reported.<\/p>\n
More Microsoft:<\/p>\n
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Bank of America resets Microsoft stock price target for 2026<\/p>\n
She also pointed to a tough comparison. The year-earlier period “benefited from Windows 10 end of support,” when many people upgraded old computers at once, Hood said.<\/p>\n
In plain terms, last year’s upgrade rush is over, and this year’s PCs cost more. Both push sales down.<\/p>\n
Microsoft’s AI business is now the whole story<\/p>\n
The rest of Microsoft looks very different.<\/p>\n
Revenue rose 19% to $92.3 billion, and earnings per share rose 18% to $4.89 on an adjusted basis. Analysts had expected $4.72 per share on $90.75 billion in revenue, according to 24\/7 Wall St.<\/p>\n
Microsoft Cloud revenue rose 30% to $63.9 billion. Azure, its cloud computing platform, grew 48%, ahead of the roughly 45% investors were watching for.<\/p>\n
Here is how the two halves of Microsoft compare, according to the release:<\/p>\n
Agents and Infra segment: $76.8 billion in revenue, up 25%<\/p>\n
Devices and Consumer segment: $15.5 billion, down 3%<\/p>\n
Windows OEM and devices: Down 22%<\/p>\n
Xbox content and services: Down 2%<\/p>\n
Commercial backlog: $677 billion, up 73%<\/p>\n
By my math, the Agents and Infra segment now accounts for about 83% of Microsoft’s revenue.<\/p>\n
“Results exceeded expectations across revenue, operating income, and earnings per share,” Hood said in the release.<\/p>\n
“We are delivering greater capability, choice, control, and cost efficiency for customers across our entire stack,” CEO Satya Nadella said.<\/p>\n
The headline numbers also got a small lift from OpenAI. Microsoft’s reported earnings of $4.92 a share included a $207 million net gain tied to its OpenAI investment, compared with a $3.1 billion net loss a year earlier.<\/p>\n
The AI bill keeps getting bigger<\/p>\n
That growth isn’t cheap.<\/p>\n
Microsoft spent $39.4 billion on property and equipment in the quarter, roughly double the $19.4 billion it spent a year earlier, the release showed. Most of that goes to data centers and AI chips.<\/p>\n
Before the report, investors expected quarterly capital spending above $50 billion once leases are included, 24\/7 Wall St reported. Shares rose about 4% in after-hours trading as investors focused on Azure.<\/p>\n
Shopping for a laptop costs more now<\/p>\n
If you’re shopping for a laptop, expect to pay more than you did a year or two ago. Memory chip costs are being passed on to buyers.<\/p>\n
Here’s how to keep the cost down:<\/p>\n
Buy last year’s model. Discounted older stock may still have pre-increase pricing.<\/p>\n
Check the memory you actually need. Paying for extra RAM costs more than it used to.<\/p>\n
Watch holiday sales. PC makers often discount around Black Friday to clear inventory.<\/p>\n
Don’t upgrade just for AI features. Many AI tools run in the cloud on the computer you already own.<\/p>\n
Microsoft investors are focused on Azure<\/p>\n
If you own Microsoft, the Windows slump barely moves the needle. The stock now trades on Azure and AI demand.<\/p>\n
The shares were trading around $527.75 before the report. A 4% after-hours gain would still leave investors watching whether Azure can stay this strong while spending doubles.<\/p>\n
I’d still watch the consumer side. It’s the part of Microsoft most exposed to everyday spending, and it’s shrinking while the AI bill grows.<\/p>\n
Microsoft is betting that cloud customers will keep paying more than enough to cover that bill. For now, they are.<\/p>\n
Related: Salesforce unveils AIforce as Benioff takes shot at Microsoft<\/p>\n
#Microsoft039s #Windows #sales #fell #prices #climb<\/p>\n","protected":false},"excerpt":{"rendered":"
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