Microsoft is burning through billions on AI, but Wall Street is finally demanding to see where the payoff is. The earnings announcement triggered a $357 billion valuation wipe-out, the largest in Microsoft's history and the second-largest in history overall (Nvidia managed to lose $593 billion in value in the wake of DeepSeek in early 2025).

Windows

Windows 11 has over one billion users - and, surprise, it got their faster than Windows 10 without any of the shenanigans
Microsoft to address the quality issues in Windows 11 in 2026
There is already evidence that Microsoft is trying to make Windows 11 suck less: Recent OneDrive changes that address a key ensh*ttification, and let's not forget all those security advances
What did Microsoft really promise? Not much
Microsoft has new EVPs for Security and Quality
Microsoft belatedly delivered the January Week D update last Thursday, a preview of this month's Patch Tuesday
Dev and Beta builds both deliver Mark Russinovich's sysmon tool

Microsoft earnings deep dive

Microsoft reported a net income of $38.5 billion on revenues of $81.3 billion in the quarter ending December 31. Those figures represent gains of 60 percent and 17 percent, respectively, year-over-year
Earnings analysis: All eyes are on AI and no one is happy
Microsoft spent $37.5 billion on AI infrastructure (capex) in the quarter, up 66 percent YOY, and it's on track to spend $150+ billion in the fiscal year
Every single question was about this and how it will ever recoup the costs
There are now 15 million paid Microsoft 365 Copilot seats out of 450+ million Microsoft 365 seats
OpenAI is Microsoft's biggest Azure customer, but it's unclear if there is any real money there because of accounting tricks
Windows, Edge, and Bing all "gained share," PC maker revenues were up just 1 percent, the Windows 10 upgrade cycle was mostly a bust (it's likely that most of it was tied to RAM pricing fears, too)
Xbox fell off a cliff with content and services revenues down 5 percent in a holiday quarter somehow and Xbox hardware revenue declined an astonishing 32 percent YOY
Standalone Office 2025 suite was a surprise hit, Hood is curious if that continues
Microsoft 365 "cost of business" up 10 percent YOY because of AI costs
AMD revenues up 34 percent to $10.3 billion
Apple delivers record revenues of $143.8 billion; iPhone made more revenues by itself than all of Microsoft

AI

Microsoft is going to basically make an app store for content makers who wish to be paid for use by AI
Anthropic advertises that Claude will be advertising-free, unlike ChatGPT
The next Firefox will include the promised AI kill switch and Vivaldi "extends the middle fingerˮ to AI

Xbox and games

AMD reveals next Xbox console in 2027
We're getting a solid collection of Xbox Game Pass titles for the beginning of February
Battlefield 6 was the best-selling shooter of 2025 and EA made $1.9 billion in Q4
Epic Games has big plans for its PC launcher/store
Nintendo has now sold 17 million Switch 2s as OG Switch hits 155 million units

Tips and picks

Tip of the week: Make OneDrive Folder Backup work for you
App pick of the week: Bitwarden (TWiT sponsor)
RunAs Radio this week: Getting Started using Purview with Erica Toelle
Brown liquor pick of the week: Glendronach Ode to

These show notes have been truncated due to length. For the full show notes, visit https://twit.tv/shows/windows-weekly/episodes/969

Hosts: Leo Laporte, Paul Thurrott, and Richard Campbell

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WW 969: The Hidden Sweatshop - Windows 11 Reaches 1 Billion Users!

Windows Weekly (Audio)