For investors who follow Microsoft (NASDAQ:MSFT), it will come as no surprise that it has surpassed the 200 million download milestone for its new Windows 10 operating system. That's an impressive figure to be sure, given its relatively recent launch. The popularity of the OS should help allay investors' angst following last quarter's 6% drop in Windows revenue, an ongoing theme that has confined Microsoft stock to a tight trading range since last October.
Much of Windows 10's growth came in the last month of 2015, thanks to what appears to be a surprisingly solid holiday season for PC sales. In fact, a whopping 87% of PCs sold since Black Friday came equipped with Windows 10. But even with all of the OS good tidings, there's even better news for Microsoft: Enterprises are joining the Windows 10 throng en masse, setting the table for what could prove to be years of growth.
How big is big?
As it relates to enterprise operating systems, Microsoft Windows has a similar commanding position that everyone's mobile OS competitor Alphabet does thanks to Android. Microsoft currently owns about 3% of the mobile OS market, though it's ever so slowly inching its way up the ladder. And Microsoft's Windows 10 enterprise adoption could give CEO Satya Nadella's mobile-first initiative a further boost.
A full 76% of Microsoft's bevy of enterprise OS customers are testing Windows 10 via pilot programs, and the number of installs among the commercial crowd is growing daily. In fact, just over a month ago, Microsoft announced that 14 million enterprise customers were running Windows 10. As of Jan. 4, that figure had grown to 22 million.
That may seem like small potatoes given the rapid adoption of Windows by consumers, but the ancillary benefits of all of those enterprise customers will pay dividends in a number of ways.
What's the big deal?
Businesses, unlike consumers that were offered Windows 10 for free, pay for the privilege. Sure, most enterprises that upgrade are already paying customers, but they will be on the hook for various licensing and upgrade fees down the line. That said, the direct revenue Microsoft generates from enterprise OS customers is just the tip of Nadella's mobile-first, cloud-first iceberg.
Additional enterprise users should translate to even more cloud revenue than Microsoft's existing $8.2 billion plus annual run-rate as businesses continue the shift to off-site hosting. Also, investors can expect upgrades from many Windows 10 enterprises to Office 365 and other services, boosting revenue even further.
Less tangible, but just as intriguing, is the notion that the more workplace Windows 10 users there are, the more comfortable they will become with the new OS, increasing the likelihood of individual and group device sales running Microsoft's latest upgrade. As Nadella has made clear, getting Windows in front of as many consumers as possible -- regardless of device manufacturer -- is a key aspect of his strategy. And it's working.
A couple more considerations
Microsoft said Windows 10 has driven a 30% jump in Bing usage which, coincidentally enough, is nearly identical to the unit's 29% jump in revenue last quarter: an ongoing theme investors will likely see continue. Alphabet already knows the value of getting its free OS into hands of the masses: It drives a ton of traffic to its search engine, which in turn helped it generate nearly $16.8 billion of its $18.7 billion in total revenue last quarter from advertising. Now, Microsoft is beginning to reap the rewards of its own similar OS plans.
Breaking the 200 million download figure in so short a time puts Microsoft right on course to hit its one billion Windows 10 objective, and it warrants recognition. But Windows 10 enterprise customers shouldn't be overlooked, both for what they bring to the table directly, and for the ancillary benefits that may not be as easy to measure but will almost certainly play a key role in driving Microsoft's future.