Microsoft Surface Revenue Plummets 30%: Saturated Market, Elusive Buyers, and Declining PC Sales

What You Need to Know

  • Microsoft's revenue in its More Personal Computing division fell 9% year-over-year.
  • Windows OEM revenue fell 28%, while Surface revenue fell 30%.
  • The weak PC market, driven by external economic headwinds and excess inventory, is hurting the Surface division.

Microsoft's Q3 fiscal year 2023 earnings were released today, and overall, the company is doing well with $52.9 billion (opens in a new tab) in revenue (up 7%), driven mainly by the cloud, LinkedIn, servers and commercial products. These $52.9 billion in revenue surprised Wall Street, which was expecting $51 billion. As a result, Microsoft's stock rose 5% in after-hours trading.

The More Personal Computing division, which includes Windows, Surface (devices), Xbox and games, and search, is shifting towards a consumer viewpoint with a business crossover. Unfortunately, this part of Microsoft is not doing very well, down 9% YoY, due to lower demand for Surface and Windows.

Windows OEM revenues have fallen 28% due to "high channel inventory levels," which means the company is referring to too many products in stock (from their OEM partners) and not enough people buying them. Microsoft notes that it is "beyond declining PC demand," suggesting that it is doing a little worse than the market.

However, it's not all bad news as Windows commercial OEM and cloud services grew 14%, driven by "solid renewal execution and increased deal activity that drove higher revenue recognition throughout the year."

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