I don't think WM10 is going anywhere.
Microsoft is very aware that mobile is the future of computing. The last Lumia phones of this release cycle were, as they said, for the fans who wanted updated hardware. The fans are often times people on the Insider release cycle and "in the know". This really is their "retrenching" phase, as their vision of the OS on mobiles is relatively incomplete. This vision is a seamless Windows OS everywhere, and it's in its infancy at this point. There is incentive to make apps simply because they can target (mostly) anything running W10, which is a lot of machines and devices. It'll become harder to ignore at a certain point, because it'll be simply everywhere. Project Centennial is a good example (it brings Win32 apps to the Store). So like a package manager for Windows.
It's not as if they knew this wasn't coming either. They didn't advertise the phones because it didn't jive with their vision and it wasn't their best step forward. They knew this. It wasn't going to win the hearts and minds of those on other OSes. They know it wasn't ready for primetime. Their next step, however, will be their best step forward. Those of us giving feedback with the Insider program are helping to further that goal in terms of software. The mobile market is reaching maturity and products are offering less and less in terms of differentiating features, benefits from prior years models, and iterations of the same UI. Matias Duarte of Google lamented the stale state of phone UI in December, and really doesn't know where to go from here. The market is definitely primed for a change.
Everyone was down on the Surface when it first came out and still were up until last year, and said that Microsoft should just quit making hardware. Bing was another one people said should just pack up shop, it's a waste. Again, it's doing very well as of late. HoloLens was a total surprise, and shows they're looking into the future of computing.
They're definitely learning, contrary to what some people may think, and definitely turning things around. Surface slowly but surely set a tone for tablets and hybrids. It's not unthinkable that the same could happen with phones.