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‘But does it really make a difference now?’
Microsoft’s Q1 2024 earnings report shows continued growth, driven by its cloud services. The company reported earnings of $56.5 billion, a 13 percent increase from the previous year, and profits of $22.3 billion, a 27 percent increase. While almost every aspect of Microsoft’s business is thriving, its devices segment, which includes Surface hardware, HoloLens, and accessories, experienced a 22 percent decline compared to last year.
This decline in the devices segment has been a trend over the past two years, with revenues dropping from $7.2 billion in 2020 to $6.5 billion in 2021 and $5.4 billion in 2022. Despite this decline, the drop in earnings was lower than the company’s estimated mid-30 percent decline from last quarter.
Ahead of Microsoft’s recent device event in New York City, it was evident that its Surface PCs were struggling to gain traction. The introduction of the Surface Laptop Studio 2 and Surface Laptop Go 3, while welcome upgrades, are unlikely to reverse the downward trend. These devices offer solid improvements but are not transformative enough to attract a significant number of new Surface users.
Given Microsoft’s success in the cloud business and its focus on AI, it raises the question of whether it should continue competing in the PC market. With Apple’s successful transition to its own Arm chips and the agility of other PC manufacturers in adopting new technologies, there may not be much room left for Microsoft in this space.