Microsoft Surface revenue is up 10%, while Windows rev is down 2% for FY22 Q4

• Microsoft brought in $14.36B in More Personal computing, just below forward guidance, for FY22 Q4
• Surface revenue was up 10%, driven by commercial sales
• Windows OEM rev declined 2% due to “production shutdowns” in May and a deteriorating PC market
• Search and news advertising grew 18%, just below the expected 20% projected

Update 7/26/22: 6:10 PM ET: During its earnings call, Microsoft expected next quarter’s revenue for More Personal Computing to fall between $13 and $13.4 billion. Windows OEM is expected to decline in the “high single digits” due to continued weakness in the PC market. Surface revenue is expected to be down in the “low single digits.” Search and advertising, however, is expected to be up mid to high teens.

Microsoft has posted its FY22 Q4 earnings (opens in new tab) today, reporting $51.9 billion in total revenue (up 12% year-over-year), just below the street estimate of $52.4 billion, marking one of the first times the company hasn’t beaten Wall Street expectations.

In More Personal Computing, which includes Surface, Windows, Bing, and more, revenue was $14.36B, below the estimated $14.65- to $14.95 billion projected during last quarter’s earnings call. Still, the number is up 2% year-over-year as Microsoft brought in $14.09 billion in 2021.

Windows OEM was down 2%, driven by PC production shutdowns in China, which hampered the release of new PCs announced earlier this year at CES. Those constraints have now been fixed as many of those laptops are now shipping with Intel 12th chips, Qualcomm 8cx Gen 3, and AMD’s latest. However, Microsoft estimated Windows OEM growth in the low to mid-single digits to be “driven by the continued shift to a commercial-led PC market where revenue per license is higher.”

During the earnings call, Microsoft noted that PC sales are still above pre-pandemic levels despite supply-chain constraints. 

For Surface, things were not as bad. Microsoft had expected “low double digits” for revenue growth, and it hit 10%, year-over-year, hitting the bottom of that estimate. Commercial purchases instead of consumers mostly drove sales of Surface, according to Microsoft.

Search, including news advertising, was up 18%, below the 20% projected last quarter. Microsoft notes that search revenue was negatively impacted by “reductions in customer advertising spend,” likely due to concerns over inflation and a possible recession.

Gaming, including Xbox, did see declines, but they were in line with guidance from last quarter.