Microsoft updates Windows 11 features as PC license revenue declines

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Windows 11 update and revenue dip

Highlights

Microsoft rolls out preview update KB5127936 for Windows 11 26H2/25H2, introducing customizable right-click menus and Cloud Rebuild OS recovery.
Windows OEM revenue drops 27%, with the OEM and devices segment down 22% for the quarter, reflecting weaker PC demand and inventory drawdowns.
Azure revenue rises 48% and Microsoft Cloud revenue grows 30% year over year, now representing about 70% of total $92.3 billion quarterly revenue.

Windows 11 changes and rollout plan

As reported by Ars Technica, Microsoft is beginning a gradual rollout of preview update KB5127936 for Windows 11 versions 26H2 and 25H2, with wider availability set to follow after general release.

The update introduces a “customize menu” button that lets users control which commands appear in the right-click menu. Users can switch built-in options such as Send To or Create Shortcut on or off, rearrange commands on the main menu, and decide whether third-party extensions appear in main or submenus.

The change addresses a complaint that has persisted since Windows 11 altered familiar right-click behavior by moving some commands into icon shortcuts and others behind a “Show more options” layer. Microsoft is also adding Cloud Rebuild, a recovery feature that can reinstall Windows 11 directly from Windows Update even when an existing installation does not boot.

Cloud Rebuild does not restore apps or files, making it closer to a fresh installation than a repair process. Microsoft also allows users to sanitize full system drives before reinstalling the operating system.

PC market weakness offsets broader gains

Microsoft’s quarterly results show continued weakness in its Windows-related hardware and licensing business. CFO Amy Hood says Windows OEM revenue is below expectations and decreases 27%, or 28% in constant currency, driven by prior-year demand linked to Windows 10 end of support, inventory drawdowns by OEM and channel partners, and weaker PC market demand.

The broader Windows OEM and devices segment, which includes Surface products, falls 22% in the quarter. Hood adds that Microsoft expects these trends to continue through the rest of the fiscal year, suggesting that recent hardware launches are not yet contributing meaningfully to results.

At the same time, Microsoft says Azure revenue jumps 48%, while Microsoft Cloud revenue rises 30% year over year. That leaves cloud operations accounting for roughly 70% of the company’s total quarterly revenue of $92.3 billion, softening the impact of the slowdown in the PC business.

In our earlier article on the Nasdaq 100’s decline, we noted the index slid sharply despite strong quarterly results from SpaceX, with broad selling pressure keeping it below key short- and medium-term moving averages. The piece highlighted that AI optimism and focus on upcoming big-tech earnings were not enough to shift sentiment, leaving traders watching key support levels for potential further downside.

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