Microsoft Surface just had its best holiday season yet, leading to a record quarter for the hardware group.
Microsoft reported $1.86 billion in Surface revenue in the company’s second quarter, up a whopping 39 percent over a year ago. The breakout comes after a couple of years of flat sales during the busy holiday period.
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Microsoft CEO Satya Nadella briefly mentioned the growth of the Surface division in a call with investors Wednesday, saying the group had its “biggest quarter ever this holiday.” He said its newest devices set the bar for the industry.
Microsoft has high expectations for Surface going forward. On a call with investors, Microsoft CFO Amy Hood projected revenue growth of more than 20 percent for Surface next quarter, and she said the group will account for a larger share of the revenue mix for the More Personal Computing division that it falls under.
Microsoft did its best to juice holiday sales this year. In October, the company unveiled several new and refreshed devices, including the next generation of Surface Pro, Surface Laptop and Surface Studio. It also debuted a surprising new offering: the $350 Surface Headphones.
Like other parts of Microsoft, the hardware division was suffering as recently as a few years ago, reeling from a $900 million financial blow. But the decision to focus on productivity applications, and a series of hardware hits, starting with Surface Pro 3 in 2014, established Microsoft as a top 5 PC vendor in the U.S. by unit shipments, with an estimated 602,000 units shipped in the third quarter.
“The company has finally found its stride in hardware, it has a much better understanding of the mechanics needed to produce premium hardware, and it has achieved its goal of setting a higher bar for PCs,” tech journalist Brad Sams writes in the new book “Beneath a Surface.” “While the company has yet to achieve the same level of admiration that is afforded to Apple, there is no doubt that Microsoft is headed down that path.”
In the book, Sams lays out potential roadmap for upcoming Surface releases, though he cautions the dates are a ways out, so things could always change. Here’s the possible roadmap, per the new book:
- The newest version of the Surface Pro tablet, with a USB-C port, smaller bezels, rounded corners and several new color options could come in the fourth quarter of 2019.
- A new Surface Laptop, possibly running on an AMD processor rather than the usual Intel processor, may also surface toward the end of the year.
- This spring, Sams reports, Microsoft may hold an event to unveil an “ambient computing” device that can sense and respond to user presence. Sams reports that “the product is designed to help deal with some of the common frustrations of using a smartphone,” but he says he doesn’t think it will be a phone.
- A pair of new lower-cost devices Xbox One S devices could arrive this year. Sams reports that one of the models may be all digital, without a disc drive.
- Looking ahead to 2020, Sams predicts Microsoft will unveil the next generation of the tablet-computer hybrid Surface Book. Later that year, Sams reports that Microsoft could release a reimagined version of the Surface Studio desktop computer, but it will be similar to the Surface Hub 2, which includes a “modular design” for easily upgrading the device rather than having to buy a new one every couple of years.
- And then there’s “Andromeda.” Reports of a foldable, dual-screen device, that could be the company’s next stab at the smartphone market have trickled out for some time. Sams adds new insight, reporting that the device, which could come late this year, is bigger than previous reports indicated and may be closer to a PC than a smartphone.
