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Microsoft is rolling in dough, no thanks to Surface

But does that even matter anymore?

Devindra Hardawar/Engadget

Microsoft's most recent Q1 2024 earnings report continues the company's upward trajectory thanks to the cloud. Microsoft's earnings reached $56.5 billion, up 13 percent from last year! Profits hit $22.3 billion, up 27 percent. Almost every aspect of Microsoft's business is a success — that is, except for its devices, which dropped 22 percent from last year.

That segment, which includes its Surface hardware, HoloLens and accessories, has been in decline over the last two years. It fell from $7.2 billion in revenue in 2020 to $6.5 billion in 2021 and $5.4 billion in 2022. And there doesn't seem to be any sign of that stopping. (At the very least, its devices earnings drop was lower than the mid-30 percent decline the company estimated last quarter.)

Ahead of Microsoft's most recent device event in New York City, it was obvious that its Surface PCs were in a rut. The arrival of the Surface Laptop Studio 2 and Surface Laptop Go 3, while welcome, likely won't change that. They're both solid upgrades, but they're not transformative enough to woo over many new Surface users.

It's becoming increasingly clear that the time of the Surface may be over for Microsoft. Panos Panay, the charismatic product lead for those devices, has moved to Amazon. The iconic Surface tablet line hasn't been touched at all this year. Given Microsoft's wildly successful cloud business, as well as its gamble on AI this year, is there any point in duking it out in the PC market?

Between Apple's successful transition towards its own efficient-yet-powerful Arm chips, and more nimble PC makers who can quickly adopt new CPUs and GPUs, there just isn't much room left for Microsoft.