The Memory Crunch Is Crushing Microsoft Windows PC Sales
A global memory shortage is doing something no software competitor has managed: shrinking Microsoft's Windows business faster with each passing quarter, and the damage is spreading beyond PC makers into the data centers powering Microsoft's own AI ambitions.
Microsoft (NASDAQ:MSFT | MSFT Price Prediction) said on October 28, 2026, that its Windows business will shrink faster in the December quarter than in the September quarter it had just reported. The stock closed at $531.01 before the results. It then rose 2.90% to $546.39 in after-hours trading as of about 7:59 p.m. ET, because cloud strength offset the Windows warning.
In this case, Windows sales means Windows OEM revenue, which is the license fees Microsoft collects from PC makers such as HP (NYSE:HPQ) and Dell Technologies (NYSE:DELL). That revenue moves with PC unit sales. The memory shortage that is pressuring those PC makers also raises what Microsoft pays to build data centers.
Microsoft’s Windows Guidance Deepens to a Mid-30s Decline
Devices and Consumer revenue was $15.5 billion, and Windows OEM and devices revenue fell 22%. That roughly matched the low-20s decline CFO Amy Hood guided for on July 29, 2026.
The Windows OEM line by itself missed. Amy Hood said it fell 27%, or 28% in constant currency (excluding exchange-rate moves), the same rate Counterpoint Research expects PC shipments to fall in the December quarter. She said it was “below expectations” and pointed to “the Windows 10 end of support demand in the prior year, inventory drawdowns by OEM and channel partners and weaker PC market demand.” The first cause is a tough comparison, since a year earlier buyers rushed to upgrade as Windows 10 support ended.
For the December quarter, Amy Hood said “Windows OEM and devices revenue should decline in the mid-30s” and guided Devices and Consumer revenue to $15.9 billion to $16.4 billion. She added, “We expect these trends to continue through the rest of the fiscal year.”
How Memory Prices Led PC Makers to Overstock Before the Slump
The link to memory comes from Hood’s earlier comments. In January 2026, she highlighted “the potential impact on the PC market from increased memory pricing,” and on July 29, she said partners were building inventory “given increasing component prices.”
PC makers stocked up ahead of price hikes and are now selling down that inventory. That helps explain why Amy Hood’s guided decline deepened from the low 20s to the mid-30s.
Ben Yeh, a principal analyst at Omdia, said memory’s share of PC costs has risen from roughly 15% to nearly 40%. That cost squeeze cut September-quarter PC shipments 21% to 57 million, Counterpoint Research counted, with HP falling 31% and Dell 25%; it expects another 27% drop in the December quarter. Its senior analyst, Minsoo Kang, said: “rising memory and component costs push system prices higher and force consumers to delay replacement purchases.”
PC makers have been slipping, with HP down 3.37% to $32.45 in the October 28 regular session, and Dell slipped 1.63% to $493.79. Intel (NASDAQ:INTC) rose 1.91% to $95.53, then dropped 2.55% to $93.09 after hours as of about 7:59 p.m. ET. Intel is expected to report on October 29, and HP and Dell are expected to report around November 24, although none of the three has confirmed its date.
Memory Costs Hit Microsoft in Both Windows and Data Centers
Amy Hood said about three-quarters of September-quarter capital spending went to short-lived assets, “primarily CPUs and GPUs, including higher memory and storage costs.” The same shortage that is cutting into Windows licensing also raises Microsoft’s data-center costs.
Microsoft’s results still held up because Devices and Consumer is the smaller of its two segments. That data-center spending is going toward meeting AI demand from paying customers, and the suppliers wiring up those facilities, from power to cooling to networking, are the quieter beneficiaries of the same expansion (we covered seven of them in a free report on the AI infrastructure trade).
What Could Move MSFT Stock After This Windows Warning
A deeper Windows decline reduces a high-margin license stream, but it leaves the cloud business that drives Microsoft’s growth intact. A bottom in Windows would show up as partner inventories return to normal, memory prices ease, and the Windows 10 comparison drops out of the numbers.
If the December-quarter earnings report shows Windows OEM and devices revenue falling further than Amy Hood’s mid-30s guide, the bullish case for Microsoft weakens. A close below $531.01 on October 29 would also suggest the market weighs Windows more heavily than the after-hours gain implied.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
