The Thurrottification of Tech - Microsoft FY27 Q1 Results & XBOX COO Mystery

Microsoft Earnings and Reporting Transparency

• Microsoft reported $92.3 billion in revenue and $36.6 billion in net income for the quarter ending September 30, 2026, up 19% and 32% year over year, respectively.
• Paul Thurrott criticized Microsoft’s new reporting structure, which combines Microsoft 365 and Azure-related businesses under “Agents and Infrastructure” and places Windows, Xbox, and advertising under “Devices and Consumer.” He argued that the new segments make results harder to compare and obscure individual product performance.
• Microsoft disclosed $33 billion in Azure revenue and nearly $28 billion in Microsoft 365 cloud revenue. Windows revenue from PC makers was $3.6 billion, down 27% year over year, with a further decline expected in the following quarter. The speakers linked the weakness to high PC component prices and manufacturers drawing down inventory.
• Xbox revenue was $5.4 billion, slightly below the year-ago figure. Content and services declined 2%, though Microsoft expected growth in the next quarter.
• Microsoft reported $45.2 billion in quarterly capital spending, up 30% year over year, and plans to spend $170 billion on capital expenditures during calendar 2026. Thurrott argued that the headline figure does not capture all AI-related costs, citing Microsoft’s accounting changes and limited disclosure about infrastructure spending.
• Microsoft did not provide an updated figure for paid Microsoft 365 Copilot subscribers. Thurrott saw the omission as a possible sign of disappointing adoption, though the panel discussed cases where Copilot was useful, particularly for searching Outlook and retrieving past information.
• Microsoft reported $10 billion in quarterly revenue from OpenAI, while OpenAI reportedly still owed Microsoft $7.2 billion. The speakers also discussed Microsoft’s ownership stake falling from 27% to 24%, attributing the dilution to a funding round.

Windows and AI

• Thurrott said two Microsoft sources had confirmed that a major reason for Windows 11 improvements is to make the operating system a stronger platform for local, hybrid, and agent-based AI.
• Microsoft is working to improve Windows 11 performance on systems with 8 GB of RAM. The panel welcomed broader memory-efficiency improvements while questioning whether 8 GB should be considered adequate.
• Microsoft Edge is the first Windows app to use a system-level accelerated app-launching feature. Microsoft says launches can be about 15% faster, and up to roughly 30% faster under heavy multitasking. The feature requires a recent Windows update.
• Insider builds are testing expanded Windows Search features, including inline actions, settings-related assistance, and the ability to find and stream supported Android phone apps through Phone Link.

RTX Spark and Local AI: Hands-On Evaluation

• Thurrott described testing RTX Spark laptops priced at roughly $3,000–$7,000. He praised the hardware but judged the platform immature: the laptops are expensive, heavy, hot, noisy, and poorly suited to running persistent AI agents. Intensive local AI workloads also drain the battery quickly.
• He said the system’s CPU and GPU memory is better described as shared memory, rather than fully unified memory. Users can change the allocation, but must reboot, and the operating system does not manage it smoothly. He argued that a stationary, network-accessible AI box would be a more appropriate form factor.
• Local AI can run models privately and without relying on cloud services, but setup and performance depend heavily on model choice, memory configuration, and software. Thurrott found cloud AI much faster and more capable for some tasks, while local models could handle basic interactions and simple experiments.
• The discussion emphasized the potential of hybrid AI: routing straightforward requests to local models and sending more demanding tasks to cloud models, ideally with user or business controls over cloud usage and cost.

Other Technology and Industry Discussion

• Intel and AMD are benefiting from AI data-center demand even as parts of their PC businesses face pressure. The panel noted the unusual dynamic of companies being challenged in traditional PC markets while growing through AI infrastructure.
• The speakers criticized plans by major AI firms to support a web-scraping opt-out mechanism through a robots.txt-related standard, arguing that it comes years after much web data has already been collected.
• Google’s proposal that schools disabling AI features could also lose access to search drew criticism and was compared to Microsoft’s past bundling of Internet Explorer with Windows. The panel characterized the approach as an antitrust risk.
• Anthropic and OpenAI are bringing coding and productivity experiences closer to their main AI chat interfaces.

Xbox

• Xbox cloud-gaming previews include using a phone as a controller for Xbox games on smart TVs, and a controller that connects directly to a cloud-gaming session over Wi-Fi to reduce latency.
• Xbox executive Helen Chiang’s departure from the newly created COO role remained unexplained. Chiang disputed claims that she was fired for policy violations and denied several specific allegations, but did not clarify whether she left voluntarily or was terminated.
• The panel noted that GTA 6 was reported to require about 212 GB of storage on current-generation consoles.

Reviews, Guides, and Picks

• Hands-on review: Thurrott’s RTX Spark evaluation focused on cost, performance, thermals, battery life, memory allocation, and suitable use cases. He concluded that the platform is not yet compelling for most users at its price.
• Practical local-AI guidance: Thurrott recommended starting with the standard LM Studio app rather than its more complex agent-oriented “Bionic” version. LM Studio can assess hardware and suggest suitable models across a range of PCs. He also shared comparisons involving locally generated simple games and cloud AI, which was substantially faster in his tests.
• App pick — Start11 v3: Stardock’s Start-menu customization tool adds Start-menu widgets and further taskbar customization. The panel noted a release-preview price of $8, with a planned price of $10.
• Developer discussion: On RunAs Radio, Richard Campbell and guest Jason Helmick discussed PowerShell’s newer cross-platform versions, migration from Windows PowerShell 5.1, and Desired State Configuration for detecting and correcting system-configuration drift.
• Other pick: Richard Campbell featured Caol Ila 12-year-old whisky as a personal pick rather than a technology review.

Main Speakers and Sources

Main speakers: Micah Sergeant (host), Paul Thurrott, and Richard Campbell.

Other sources discussed: Microsoft’s earnings report and analyst call; Microsoft Insider and Windows feature announcements; Microsoft sources cited by Thurrott regarding Windows’ AI strategy; reporting by Eurogamer on Helen Chiang; and Chiang’s LinkedIn statement.