The drop in Windows revenue tied to PCs was sharper than Microsoft had expected. In the July-September 2026 quarter, the revenue Microsoft collects from PC makers for each preinstalled copy of Windows dropped 27%, or 28% in constant currency. Microsoft itself announced the figure with its earnings, citing three causes: demand pulled forward by the end of Windows 10 support the year before, inventory that PC makers and channel partners are working through, and weaker PC demand overall.
Across the wider Windows OEM and Devices category, which includes Surface, revenue fell 22%, from $4.55 billion to $3.55 billion. Microsoft does not break out Windows 11 revenue separately, which makes it hard to tell how much of the drop comes from the version change.
The 2025 boom has run out
The comparison with last year explains much of the fall. In the third quarter of 2025, global PC shipments rose 8.2% to nearly 70 million units, driven by the rush to replace Windows 10 machines. By year end, shipments were up 9.1%, with the fourth quarter fuelled by the Windows 11 upgrade cycle, according to Gartner. PC makers were open about it: in August 2025, Dell's COO Jeff Clarke pointed to an aging installed base and the end of Windows 10. Microsoft itself said in July that the prior-year quarter was an unusually high bar because of that effect.
The deadline, in other words, worked only once. People who needed a new PC bought one before October 2025, and a year later they have no reason to buy another.
Windows 10 holdouts are still there
Some users have not moved. Lansweeper found that in July 2026 Windows 10 still ran on about 16.9% of the PCs it tracks, and on 21.4% of those in small and mid-sized businesses. Only about 2.8% of those machines cannot run Windows 11, so most could make the switch if their owners chose to. HP's CFO said in May that roughly 30% of its installed base was still on Windows 10.
Microsoft also extended free consumer security updates for Windows 10 to October 12, 2027, which gives holdouts more time to wait rather than pushing them to switch.
Memory shortages add pressure. Counterpoint Research says global PC shipments fell 21% in Q3 2026, blamed on higher prices for RAM, SSDs and processors, and on a Q3 2025 inflated by the Windows 10 deadline. Microsoft does not directly attribute the drop to holdouts, but without a new wave of upgrades it cannot count on another Windows 11 sales surge. Copilot+ PC branding has not changed that.
Forecast for the current quarter
For October to December, Microsoft expects Windows OEM and Devices revenue to decline by about a third. Hood said inventory levels, weak PC demand and a prior-year quarter boosted by Windows 10 would keep weighing until the end of the fiscal year. Three months ago, the company had expected a drop in the high teens for the full year.
Satya Nadella, meanwhile, talks about turning every PC into a secure box that runs AI models locally, on new chips from AMD, Intel, Qualcomm and Nvidia. He also said: "We think of Copilot as the new OS for work." Many Windows fans may not enjoy hearing that.
Apple's $599 MacBook Neo is, according to IDC, putting real pressure on the whole PC ecosystem. With a new MacBook launch on top, Windows 10 holdouts have one more reason to look elsewhere.
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