It was only a brief mention, but in Microsoft’s recent earnings call, Microsoft Chief Financial Officer (CFO) Amy Hood explained that the ongoing memory crisis is expected to impact revenue from Windows purchases. Specifically, that is, from Original Equipment Manufacturers (OEMs).
“Windows OEM revenue,” Hood says, “should decline in the high teens with roughly six points of impact from a prior-year comparable that benefited from Windows 10 end of support, six points from inventory levels that we expect to come down for the quarter, and six points from a lower PC market as prices increase due to memory cost.”
OEMs make pre-built PCs, and when you buy from one of these companies, if they don’t come with Windows 11 by default they’ll usually give you the choice to pay extra to have it installed. If you say yes to this, you’ll have an ‘OEM’ version of Windows, which is the same as regular Windows but is tied to your device rather than you as a user—you can’t transfer it elsewhere.
OEMs pay Microsoft to be able to put Windows on the systems they sell, so that’s what Hood is referring to here. Often, these will be large batches of machines for companies to buy in bulk, but they will also be gaming PC system builders, for instance.
The problem is the RAMpocalypse is driving up component prices, which means OEMs have to pay more and then pass on this cost to customers, which means less sales as home users and even companies decide to hold on to their current hardware for longer. Which means, ultimately, that OEMs likely aren’t going to be buying as many Windows licences from Microsoft, as the CFO is here predicting.
Microsoft isn’t entirely blameless here, of course, as while it’s not solely an AI company, it has been implementing AI on a vast scale through Azure cloud and in partnership with OpenAI.
The effects of the memory crisis are far from an abstract possibility, as we’ve already seen system builders complaining of high memory prices. We’ve also seen the effects on RAM prices ourselves, of course. And while some chipmakers might be cautiously optimistic about the future on this front, plenty of others—especially system builders further downstream—aren’t seeing a light at the end of the tunnel.
Gloomy stuff, but at least Microsoft says it’s focusing on improving Windows fundamentals. If hardware is taking a hit, perhaps software can soften the blow.
