Microsoft’s Slightly Better Surface Problem

In its latest earnings report, Microsoft reported $893 million in revenue on the Surface–more than double the previous quarter.

Microsoft’s Slightly Better Surface Problem
[Image: Microsoft]

It appears Microsoft‘s big, risky gamble on the Surface is finally paying off. Or! The so-so tablets are still putting an obvious strain on the company’s bottom line. It depends on who you ask.


Which brings us to the key financial figure jumping out from Microsoft’s earnings report yesterday: $893 million in revenue from Surface sales. For a bit of context, that’s more than double the $400 million figure the Windows tablets reached in the previous quarter. Microsoft declined to pin a figure on how many units were moved, although it did reveal that it sells more Surface RTs than Surface Pros.

There are a couple of ways to look at this. Business Insider notes that while it’s “nice growth, it’s still pretty tiny, especially compared to Apple’s iPad business.” Mashable on the other hand says the results are “encouraging,” but the numbers are a bit misleading “since sales of such devices typically rise dramatically” during the holidays. And for what it’s worth, the Wall Street Journal reports that the company still loses money on the Surface; last July, the company reported a $900 million write-down on the Surface RT.

If that’s a bit confusing, well, it is. Moving into hardware is a tricky proposition, especially for Microsoft, a company historically accustomed to the cushy margins of the software business. Nevertheless, Microsoft is still faring well overall–$24.52 billion in revenue, $6.56 billion net income–thanks in large part to strong Xbox One sales around the holidays.

As Fast Company‘s Austin Carr pointed out last September, it’s highly, highly unlike Microsoft will give up on the Surface–or hardware in general–anytime soon, even if the Surface 2.0 was met with a collective “meh.” That stubborn insistence to double-down on average products is partly due to Microsoft’s longstanding philosophy when it comes to innovation, which is: Move slow and weather criticism until the product is good.

And, if last quarter’s financials are even a lukewarm indicator of progress, that’s probably not going to change anytime soon.

About the author

Chris is a staff writer at Fast Company, where he covers business and tech. He has also written for The Week, TIME, Men's Journal, The Atlantic, and more.