Microsoft Earnings and AI Infrastructure Costs

We've heard that Microsoft will go off script this year with a 26H1 release of Windows 11 specifically aimed at Snapdragon X2-based PCs, as it did with the early release of 24H2 last year for the first-generation Snapdragon X. Also, Microsoft's latest earnings call left analysts baffled as execs dodged questions about multibillion-dollar AI losses and the real story behind OpenAI's ballooning deficit.

26H1!

• Now confirmed by the release notes of a Windows Update
• And the Dev channel will soon switch over to 26H1 testing, with Beta moving to 25H2 (from 24H2)
• Expectations? All three versions will be functionally identical except for some Copilot+ PC-specific features that may be briefly only on Snapdragon X2. And then there will be a 26H2 for everyone

More Windows 11

• Microsoft (over) simplifies its Windows Update naming scheme, and then has to backtrack a bit because of admin/IT backlash
• October Preview Update screwed up Task Manager a little bit
• Dev/Beta update noted above included a new build with Ask Copilot in the Taskbar, Full-screen experience for Xbox gaming handhelds, Shared audio over Bluetooth LE in preview, and improvements to the WOA Prism emulator (which partially explains the expectations bit above)
• Microsoft Edge password manager can now save and sync passkeys, but you should still use a third-party password/identity manager
• Microsoft Store gets a bulk installer but only on the web

Earnings learnings

• Microsoft earnings: Revenues up 18 percent to $77.7 billion but cost of AI is spiraling out of control and will only get bigger this FY
• Productivity and Business Processes revenues up 17 percent YOY to $33 billion
• Intelligent Cloud revenues of $30.9 billion, a gain of 28 percent YOY
• More Personal Computing delivered $13.8 billion in revenues, up 4 percent YOY.
• CapEx/AI infrastructure build-out costs are $34.9 billion (vs. $20 billion one year ago), plus a $4.1 billion loss attributed to OpenAI that was mentioned in a 10-Q (SEC) filing but not in its earnings reports
• Paul's analysis sticks mostly to Wall Street complicity in Microsoft's earnings non-transparency shenanigans. This is getting weird, given the amounts of money we're now talking about
• This isn't a first, but Spotify's earnings announcements includes a few BS sleights of hand too
• AMD: 36 percent revenue growth isn't enough for Wall Street
• Alphabet/Google: Up 16 percent to $102.3 billion, ads are 72.5 percent of revenues
• Amazon: Up 13 percent to $180 billion in revenues, $30 from AWS
• Apple: Up 8 percent to $102.5 billion, this quarter will be its best ever

AI, antitrust, & dev

• Epic Games and Google announce settlement in Epic v. Google, a dramatic common-sense move that Apple should (but won't) emulate
• Regulatory filings tied to Microsoft earnings suggest OpenAI lost $12 billion in most recent quarter
• Freed from Microsoft, OpenAI immediately signs $38 billion infrastructure deal with AWS
• .NET 10 to launch next week at .NET Conf 2025

Xbox & games

• Xbox Game Pass getting Call of Duty Black Ops 7, five more Day One games in coming days (with an *)
• Xbox October Update rolls out with game shader preloading on Xbox Ally, new modules in Game Hubs on console, more games to stream on Xbox Cloud Gaming, more
• Nintendo Switch 2 is off to a blockbuster first year with

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These show notes have been truncated due to length. For the full show notes, visit https://twit.tv/shows/windows-weekly/episodes/957

Hosts: Leo Laporte, Paul Thurrott, and Richard Campbell

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