How can Microsoft afford to give Windows 10 upgrades away for free?

When Microsoft announced that it would be offering consumers a free upgrade to Windows 10, it got a lot of people talking. After all, the company charged $199 per license for consumers to upgrade to Windows 7 Professional just six years ago. So clearly, a free upgrade to a new OS would have to have a big impact on Microsoft’s business, right? Not so much, according to Katherine Egbert, a managing director and senior research analyst at Piper Jaffray. She said in an email that because most people get a new version of Windows when they buy a new computer, the decision to offer free upgrades will have “no financial impact” on Microsoft. The company will still make money from PC manufacturers who have to license Windows 10 for the new hardware that they sell. In a similar vein, IDC analyst Al Gillen said that Microsoft has consistently told him that retail sales of Windows upgrades are a “non-material” part of its business. That’s not to say selling copies of the latest version of its operating system to interested consumers brings in $0 for the Redmond-based tech giant, but that it ultimately isn’t a major component of Microsoft’s business. Microsoft could be missing out on millions of dollars in sales, but that’s ultimately not much compared to the $93.5 billion in revenue it reported for its last fiscal year.