Microsoft Reports Windows OEM Revenue Decline in Q1

The company saw a 27 percent drop in revenue for the quarter ending September 2026 as global PC shipments fell.

Updated on Oct. 29, 2026 in Computers

Isometric editorial illustration depicting organized computer hardware components in a muted, professional color palette, illustrating the tech sector hardware market. — Microsoft reported a 27 percent decline in Windows OEM revenue for the first quarter of fiscal 2026 amid cooling global PC shipments. AI Illustration. Upload story photo >

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Microsoft recorded a 27% decline in Windows OEM revenue during the fiscal quarter ending September 30, 2026. This downturn aligns with a 21% reduction in global PC shipments reported for the same period.

Why it matters

The revenue drop stems from high prior-year comparisons linked to the Windows 10 end-of-support refresh cycle and rising costs for essential hardware components like processors and SSDs. Additionally, PC manufacturers are currently working through existing inventory, leading to fewer new license purchases.

Windows 11 now holds a 71.44% share of global online Windows PCs, while Windows 10 accounts for 27.82%. Microsoft also noted a 12% growth in search advertising revenue for the quarter.

The players

Microsoft

A multinational technology corporation that produces the Windows operating system and various hardware devices.

The details

Microsoft earns OEM revenue when manufacturers preinstall the operating system on new hardware. To manage the ongoing transition, the company has extended free consumer security updates for Windows 10 until October 12, 2027.

July to September 2026: Windows OEM revenue fell by 27%.
September 2026: Windows 10 market share stood at 27.82%.
October 28, 2026: Microsoft held its FY27 Q1 earnings call.
October 12, 2027: Windows 10 security update support ends.

The Tech Race

This decline reflects a broader cooling of the PC market following the high demand period established by the Windows 10 end-of-support lifecycle. As the market normalizes, Microsoft faces a significant transition phase as manufacturers shift focus toward newer hardware generations.

Consumers may find higher prices on new PCs due to elevated costs for components like RAM and processors. Users currently on Windows 10 gain more time to transition, as the company has extended security support until October 2027.

The takeaway

The PC market is currently navigating a period of reduced demand as hardware manufacturers manage excess inventory. Readers looking to upgrade their machines may benefit from waiting for component prices to stabilize before committing to new hardware.

What happens next

Microsoft anticipates that revenue for the Windows OEM and Devices category will decline in the mid-thirties during the quarter spanning October to December 2026.