Microsoft Corp. MSFT has joined its chip partner Intel Corp. INTC in expressing optimism about the comeback of PCs after reporting the second consecutive quarter of growth for Windows revenue.
What Happened: Global PC shipments are making a comeback at a time when Microsoft is increasingly focusing on bringing AI at the front and center of its product lineup.
"PC market unit volumes continue at pre-pandemic levels," said Microsoft CFO Amy Hood, reiterating what CEO Satya Nadella said during the previous quarter's post-earnings conference call.
Microsoft reported a 9% increase in Windows OEM revenue – the revenue that the company earns directly from its original equipment manufacturers (OEMs), such as Dell Technologies Inc., HP Inc., Asus, Lenovo, and others.
However, Microsoft's hardware efforts in personal computing remained dull, and "Devices" revenue is expected to decline in the March 2024 quarter.
The Windows maker is also working on making AI the star of its computing efforts. "In 2024, AI will become a first-class part of every PC. Windows PCs with built-in neural processing units were front and center at CES, unlocking new AI experiences to make what you do on your PC easier and faster," said Hood.
Microsoft also talked about the Copilot key, its first major change to the Windows keyboard in 30 years. The company also highlighted that its AI assistant, Copilot, is now available on over 75 million PCs running Windows 10 and Windows 11.
Why It Matters: Chipmaker Intel is banking on Microsoft's goal of making 2024 the "year of AI PC" to drive revenue growth.
Intel CFO David Zinsner said the "age of AI PC further enhances the value of device refresh."
Analyst firm Counterpoint Research echoed similar sentiments, saying that the global PC industry is showing "early signs of recovery."
This is also visible in data from industry tracker IDC, which pegged global PC shipments in 2023 at 259.5 million units, almost recovering to pre-Covid levels of 261 million units.
Microsoft says it is "seeing a Copilot ecosystem begin to emerge," with players like Atlassian Corp. TEAM, Air India, Bayer, and others using customized built-in plugins for their business needs.
Tech analyst and Wedbush managing director Dan Ives noted that the "AI revolution is here; monetization is actually starting," in an interview with CNBC.
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