Windows Weekly 918: Casa Chaos

With Richard in Stockholm, Leo and Paul discuss Microsoft’s earnings, Windows 11, reasoning AI, Microsoft 365, Xbox, and more.

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Microsoft earnings overview

Microsoft reported that it earned a net income of $24.1 billion on revenues of $69.6 billion in the quarter ending December 31, the second quarter of its fiscal 2025. Those figures represent gains of 10 percent and 12 percent year-over-year (YOY), respectively.

Analysis – Not much going on with client-side products and services, so a focus on AI

Top-level business units

  • Productivity and Business Processes: $29.4 billion in revenues, up 14 percent YOY. This was 42.2 percent of Microsoft’s earnings.
  • Intelligent Cloud: $25.5 billion in revenues, up 19 percent YOY. This was 36.6 percent of Microsoft’s earnings.
  • More Personal Computing: $14.7 billion, unchanged from the year-ago quarter. (Literally flat YOY.) This was 21.1 percent of Microsoft’s earnings.

Major points

  • Is DeepSeek to Microsoft AI/OpenAI what Linux was/is to Windows Server? It’s worth considering
  • At the current rate of growth, Microsoft will spend about $95 billion on AI infrastructure this fiscal year, not $80 billion
  • Microsoft’s cash flow from operations this quarter was $22.3 billion (and up over 18 percent YOY), the exact amount it spent building out its AI infrastructure. Coincidence? Honestly, yes
  • Microsoft has more than doubled its datacenter capacity in the last three years
  • Nadella referenced the Jevons effect that Leo brought up last week (though not by name) as a retort to the DeepSeek worries
  • Expansion of Microsoft 365 AI capabilities is informally called “think with AI and work with people,” it’s about collaboration

Non-AI points

  • The Windows 10 EOL “bump” was only 2.7 percent in the quarter (YOY revenue gains)
  • 15 percent of premium-priced PCs in the US over the holidays were Copilot+ PCs
  • A 4 percent revenue gain from PC makers was “partially offset by a decline in Devices,” meaning Surface
  • Xbox was an unmitigated disaster in the quarter
  • Revenues from the perpetual Office 2024 offering were higher than expected
  • Microsoft 365 Copilot is the UI for AI,” Nadella said during the call

Windows

Windows Insider

Microsoft is experimenting with new Windows 11 UIs

Microsoft Edge text rendering comes to all Chromium web browsers on Windows – That only took a few years

Related: Microsoft explains deprecation after using the term for decades

AI – Week two of submitting to our new Chinese overlords

Gemini catapults into the lead for a few days as Gemini 2.0 becomes broadly available

Inspired by DeepSeek, OpenAI releases reasoning model to free ChatGPT

Sam Altman discusses DeepSeek, more

OpenAI offers up an AI research assistant

More earnings – lightning round

Intel – $14.3 billion in revenues, down 7 percent

AMD: Revenues up 24 percent, market share gains on Intel

Apple – Record $124.2 billion in revenues, up 4 percent

Alphabet/Google: Revenues at $96.47 billion, up 12 percent – CapEx expenditures closing in on MSFT

Samsung – Revenues up 12 percent to $52.2 billion

Spotify is profitable for full year for the first time

Microsoft 365

Designer makes its way to Photos (Windows) and Microsoft 365 Copilot app (mobile)

Microsoft is removing the VPN from Microsoft 365 Family and Personal

Outlook for Mac to get email recall feature

Xbox and gaming

Starfield is coming to Game Pass Standard this month, more Game Pass titles

Forza Horizon 5 is coming to PS5

Two Age of Empires titles are coming to PS5

Remember that Microsoft partnership with Start.gg? Me neither

Nintendo revenues, Switch sales fall more than expected, will no longer beat DS this fiscal year

Tips and picks

Tip of the week: It’s time for an online account audit

Getting shut out of my YouTube channel was a wake-up call. I’m making some changes. You should as well. Related: Thinking about Sign in with Google

App pick of the week: Another week of big browser updates

Opera goes anti-Opera with a minimalist browser aimed at mindfulness

Firefox 135 adds AI chatbot to stable, more

Vivaldi 7.1 hits Android and iOS

RunAs Radio this week: Entra ID Protection with Corissa Koopmans

https://runasradio.com/Shows/Show/970

Margarita

The classic margarita recipe is:

  • 2 oz white tequila (we’ve been using Patron silver)
  • 1.5 oz Triple Sec
  • 1 oz fresh lime juice

I’ve been adding .5 oz simple syrup as well.

Shake well over ice and serve in a martini glass.

It’s traditional to dip the rim of the glass in lime juice, then salt.

In Mexico you can often get a “mezcalita” which is basically the same drink but with mezcal in place of tequila. It’s smokier (obviously).

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Thurrott