Microsoft is burning through billions on AI, but Wall Street is finally demanding to see where the payoff is. The earnings announcement triggered a $357 billion valuation wipe-out, the largest in Microsoft's history and the second-largest in history overall (Nvidia managed to lose $593 billion in value in the wake of DeepSeek in early 2025).
Windows
Windows 11 has over one billion users - and, surprise, it got their faster than Windows 10 without any of the shenanigansMicrosoft to address the quality issues in Windows 11 in 2026There is already evidence that Microsoft is trying to make Windows 11 suck less: Recent OneDrive changes that address a key ensh*ttification, and let's not forget all those security advancesWhat did Microsoft really promise? Not muchMicrosoft has new EVPs for Security and QualityMicrosoft belatedly delivered the January Week D update last Thursday, a preview of this month's Patch TuesdayDev and Beta builds both deliver Mark Russinovich's sysmon toolMicrosoft earnings deep dive
Microsoft reported a net income of $38.5 billion on revenues of $81.3 billion in the quarter ending December 31. Those figures represent gains of 60 percent and 17 percent, respectively, year-over-yearEarnings analysis: All eyes are on AI and no one is happyMicrosoft spent $37.5 billion on AI infrastructure (capex) in the quarter, up 66 percent YOY, and it's on track to spend $150+ billion in the fiscal yearEvery single question was about this and how it will ever recoup the costsThere are now 15 million paid Microsoft 365 Copilot seats out of 450+ million Microsoft 365 seatsOpenAI is Microsoft's biggest Azure customer, but it's unclear if there is any real money there because of accounting tricksWindows, Edge, and Bing all "gained share," PC maker revenues were up just 1 percent, the Windows 10 upgrade cycle was mostly a bust (it's likely that most of it was tied to RAM pricing fears, too)Xbox fell off a cliff with content and services revenues down 5 percent in a holiday quarter somehow and Xbox hardware revenue declined an astonishing 32 percent YOYStandalone Office 2025 suite was a surprise hit, Hood is curious if that continuesMicrosoft 365 "cost of business" up 10 percent YOY because of AI costsAMD revenues up 34 percent to $10.3 billionApple delivers record revenues of $143.8 billion; iPhone made more revenues by itself than all of MicrosoftMicrosoft is going to basically make an app store for content makers who wish to be paid for use by AIAnthropic advertises that Claude will be advertising-free, unlike ChatGPTThe next Firefox will include the promised AI kill switch and Vivaldi "extends the middle fingerˮ to AIAMD reveals next Xbox console in 2027We're getting a solid collection of Xbox Game Pass titles for the beginning of FebruaryBattlefield 6 was the best-selling shooter of 2025 and EA made $1.9 billion in Q4Epic Games has big plans for its PC launcher/storeNintendo has now sold 17 million Switch 2s as OG Switch hits 155 million unitsTip of the week: Make OneDrive Folder Backup work for youApp pick of the week: Bitwarden (TWiT sponsor)RunAs Radio this week: Getting Started using Purview with Erica ToelleBrown liquor pick of the week: Glendronach Ode to These show notes have been truncated due to length. For the full show notes, visit https://twit.tv/shows/windows-weekly/episodes/969
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