Microsoft’s aggressive push into artificial intelligence (AI) shows traction among enterprise customers as the company reported growth in AI adoption across its product portfolio.
“All told, we now have more than 60,000 Azure AI customers, up nearly 60% year over year, and average spend per customer continues to grow,” CEO Satya Nadella told investors at Tuesday’s earnings figures.
The company’s AI strategy extends from infrastructure to applications, with Azure serving as the foundation. “With Azure AI, we are building out the app server for the AI wave and providing access to the most diverse selection of models to meet customers’ unique cost, latency and design considerations,” said Nadella.
Enterprise adoption of Microsoft’s AI tools appears to be especially strong in the developer space. “GitHub Copilot is by far the most widely used AI-powered developer tool,” says Nadella. “Just over two years since its general availability, more than 77,000 organizations – from BBVA, FedEx and H&M, to Infosys and Paytm – have adopted Copilot, an increase of 180% year over year.”
The company Microsoft 365 Copilotan AI assistant for office workers, is also gaining momentum. “Copilot for Microsoft 365 is becoming a daily habit for knowledge workers as it transforms work, workflow and work artifacts,” said Nadella. “The number of people using Copilot at work every day has almost doubled quarter over quarter.”
Large companies are making significant commitments to technology. “All together, that is the number of customers with more than 10,000 seats more than doubled quarter over quarter, including Capital Group, Disney, Dow, Kyndryl and Novartis. And EY alone will deploy Copilot for 150,000 of his employees,” Nadella noted.
However, Microsoft acknowledged growing pains in scaling its AI infrastructure. CFO Amy Hood addressed the challenge during the call: “We are limited in AI capacity. And so we’ve actually contracted with third parties to help us out as we’re behind on some AI capacity leases.”
To meet growing demand, Microsoft is making significant infrastructure investments. “Cloud and AI related give out represents almost all of the total capital expenditure,” Hood explains. “Within that, about half is intended for infrastructure needs, where we continue to build and rent data centers that will support revenue generation for the next fifteen years and beyond. The remaining cloud and AI related The spend is primarily for servers, both CPUs and GPUs, to serve customers based on demand signals.”
The company’s approach to AI infrastructure differs from its previous cloud buildout. “When we did this last transition, the first transition to the cloud, which sometimes seems like a long time ago, things were very different. We’ve rolled out more geo by geo. And this one, because we have demand on a global basis, we do this on a global basis,” Hood said.
Microsoft’s AI strategy extends beyond office productivity to industry-specific solutions. In healthcare, “more than 400 healthcare organizations – including Community Health Network, Intermountain, Northwestern Memorial Healthcare and the Ohio State University Wexner Medical Center – have purchased DAX Copilot to date, up more than 40% quarter-over-quarter,” Nadella reported.
The company also sees strong adoption of its AI development tools by business users. “To date, more than 480,000 organizations have leveraged AI-powered capabilities in Power Platform, up 45% quarter-over-quarter,” said Nadella.
Looking ahead, Microsoft plans to further scale its AI infrastructure to meet demand. Hood noted that while there are currently capacity constraints, especially in the first half of the fiscal year, “we expect Azure’s growth to accelerate in the second half as our capital investments create an increase in available AI capacity to meet the growing demand.”
Nadella emphasized that the company’s AI strategy is based on customer demand and value creation: “We are now mainly starting on the demand side. What I mean by that is: what is the product form of the product portfolio?”
