Nadella Highlights Copilot AI Growth Amid Data Centre Investment

Microsoft recently reported a strong financial quarter, with revenues hitting $81.3 billion up 17% year-over-year and net income rising 21% to $38.3 billion. Cloud revenue set a new record, exceeding $50 billion. Despite these positive financials, the stock dipped due to investor concerns about Microsoft’s substantial capital expenditures and the pace of growth in its cloud services and software products.

CEO Satya Nadella addressed these worries during the earnings call, emphasizing the increasing demand for Microsoft’s AI products, especially Copilot, which has been integrated extensively across Microsoft’s software ecosystem. Microsoft’s capital expenditures have surged, with the company spending $72.4 billion so far in the current fiscal year, nearly matching the $88.2 billion spent over the entire previous year. Much of this investment supports the AI infrastructure powering enterprise solutions and collaborations with prominent labs like OpenAI and Anthropic.

Although reports have suggested lukewarm adoption of Microsoft’s AI, Nadella asserted that daily users of Microsoft’s consumer Copilot AI products have nearly tripled year-over-year. These consumer-facing tools include AI-powered chat, news feeds, search, browsing, shopping, and OS-level integrations. While Microsoft declined to provide a specific user count for daily usage, a spokesperson revealed that the total monthly active Copilot users spanning both consumer and commercial segments have grown to 150 million, up from 100 million last year.

Nadella provided concrete figures for Microsoft’s coding AI, GitHub Copilot, which now boasts 4.7 million paid subscribers, a 75% increase year-over-year. This demonstrates a robust growth trajectory for GitHub’s AI-assisted coding tools, complementing the 20 million total users reported last year that include free-tier participants.

In the enterprise segment, Microsoft 365 Copilot has reached 15 million paid seats out of a 450 million paid seat base. This indicates growing adoption of AI-enhanced productivity applications in workplaces worldwide.

Additionally, Microsoft’s healthcare AI agent, Dragon Copilot, designed for medical professionals, is making notable strides. It is currently available to 100,000 providers and supported the documentation of 21 million patient encounters over the quarter, a threefold increase year-over-year. This positions Microsoft as a competitive player in AI solutions aimed at the healthcare sector.

Regarding the significant capital investments in data centre infrastructure, Nadella and CFO Amy Hood emphasized that demand for AI services currently exceeds supply, with new equipment effectively booked to capacity for its usable lifespan. This suggests Microsoft’s heavy spending on AI infrastructure is being matched by customer usage and demand across its product lines.

While investors remain cautious about the speed of cloud revenue growth, Microsoft’s CEO conveyed strong confidence in the uptake and future profitability of its AI offerings, particularly Copilot variants integrated throughout enterprise and consumer products.