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Microsoft CEO Satya Nadella at the company’s Build 2016 conference. (GeekWire File Photo)

Microsoft says Windows 10 is growing faster than any previous version, racking up 270 million active users within eight months of launch. But unlike past versions, when the company collected hefty upgrade fees, much of the new growth is coming from free upgrades to Windows 10 from earlier versions.

windows 10At the same time, the market for new PCs continues to fall, with Gartner reporting a 9.6 percent decline in PC shipments in the first quarter, and IDC pegging the drop at more than 11 percent. Corporate technology budgets are tightening, making conditions tougher for Microsoft in business PCs, the Wall Street Journal reports this morning. And devices such as tablets and phones are increasingly competing for a share of those budgets.

The end result: Windows revenue could decline by 7.5 percent, to $13.5 billion this year, according to Gartner forecasts cited by the WSJ. John-David Lovelock, Gartner’s chief forecaster, tells the newspaper that some companies that paid for Windows 10 last year are waiting to roll it out fully until 2017, while others are waiting to move to Windows 10 until business conditions improve.

Microsoft points to counter examples such as the U.S. Department of Defense committing to upgrade more than 4 million devices to Windows 10 this year.

In addition, the company is taking steps to broaden its business beyond Windows for PCs. Many of its recent moves are designed to boost its revenue from cloud computing, including Microsoft Azure and Office 365. The company said in January that its commercial cloud annualized revenue run rate topped $9.4 billion.

IDC strikes a more optimistic tone about corporate tech spending. “In the short term, the PC market must still grapple with limited consumer interest and competition from other infrastructure upgrades in the commercial market,” said Jay Chou, IDC research manager, in a news release. “Nevertheless, IDC still projects total business IT spending to grow compared to 2015, and as we head toward the end of 2016 things should start picking up in terms of Windows 10 pilots turning into actual PC purchases.”

Here are charts from IDC and Gartner showing trends in Q1 PC shipments by vendor.

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