Microsoft’s Devices and Consumer revenue declined 13% (down 10% in constant currency) to $8.7 billion. Windows OEM revenue decreased 22% as revenue was impacted by PC market declines following the XP end-of-support refresh cycle. D&C Licensing revenue decreased $1.7 billion or 34%, mainly due to lower revenue from Windows OEM, Windows Phone, and Office Consumer. Gross margin decreased $1.6 billion or 34%.
- Windows OEM revenue decreased $683 million or 22%, as Windows OEM Pro revenue declined 21% and Windows OEM non-Pro revenue declined 27%. Windows OEM Pro revenue decreased, primarily due to declines in the business PC market and benefits realized from the expiration of support for Windows XP in the prior year. Windows OEM non-Pro revenue decreased, as OEMs tightly managed PC inventory ahead of the Windows 10 launch, particularly in developed markets.
- Windows Phone revenue decreased $552 million or 68%, mainly due to $382 million of revenue recognized in the prior year at the conclusion of the commercial agreement with Nokia, and a decline in royalty revenue.
- Office Consumer revenue decreased $330 million or 42%, reflecting declines in the consumer PC market, particularly Japan where Office is predominantly pre-installed on new PCs, and the transition of customers to Office 365 Consumer, where revenue is recognized ratably.