On top of this, gaming used to be (and probably still is) the main reason to cycle through PCs. If you're just going to browse the web, use relatively low resource software, etc then a PC or even laptop from a decade+ ago is 100% fine. The reason consumers upgrade is going to be heavily weighted by games. And each of those upgrades often comes with new OEM software that was licensed and other economic benefits to Microsoft.
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As for modern Microsoft, I agree with you from an outsider's perspective, but I'd bet internally it's a different game. Microsoft seems to be having major issues with labor competency, on both the implementation and management side, and it's making their entire ecosystem collapse. Anything that has major outward visibility (like desktop OS) is going to make the circus most immediately visible. I have little doubt they have the same stuff going on internally with their other offerings.
But this excludes the entire console population. This arguably excludes most Steam Deck customers, who picked it because Valve made the Linux experience seamless, so they don't have to pay attention to the details. This excludes many of the PC gamers I know, that do not care beyond whether their computer is capable of playing the games they want to. They won't even reformat their Windows to remove OEM bloat.
You don't tend to hear them online of course. They are the silent majority keeping the AAA industry alive.
I mean Windows is still a huge cash cow for them and is THE desktop OS but the actions they are taking with it sort of makes it feel like a second class citizen.
Part of the problem seems to be that desktop OS use as a whole is cratering as more and more folks who grew up in the smartphone era enter adulthood. Outside of tech circles, I meet a lot of folks who have a phone + tablet but no actual computer...