Dive Brief:
- Microsoft’s AI investments appear to be paying off as executives touted a 27% growth in its cloud computing platforms totaling $59.3 billion in revenue during its fiscal Q4 earnings call Wednesday. The growth was driven by demand for Azure, and the company’s first-party AI applications and services.
- The company added 31 new data centers this quarter, totaling 88 so far this year, as part of its plan to bolster its AI infrastructure. The company now has more than 30 million paid seats for Microsoft 365 Copilot, its AI work assistant, up from more than 20 million as of last quarter, EVP and CFO Amy Hood said on the call.
- “Across both our high-value agentic experiences and the AI platform and infrastructure, we are focused on helping customers turn AI into measurable outcomes,” Satya Nadella, Chairman and CEO, said on the call.
Dive Insight:
Microsoft bucked a trend among cloud giants, which have inched up capital expenditures in recent quarters in a bid to capture more of the AI market. Amazon, Microsoft, Meta and Google now plan to spend up to $725 billion on capital expenditures in 2026, according to Wednesday’s Q1 earnings calls.
Hood credited cloud growth to a shift toward Azure — which crossed $100 billion in revenue for the first time — as well as continued investments in AI infrastructure and growing product usage, particularly in Azure and M365 Commercial cloud
The CFO said Microsoft positioned itself well on its infrastructure investing amid a volatile AI market. The data center spending can be short-lived if demand stops outpacing supply, and the company’s diverse book of business will help in the long run, she added.
“When you look, even at our backlog, or what we added in [remaining performance obligations] this quarter, it is from the breadth of the Microsoft product portfolio, as well as our customer portfolio,” Hood said.
Earlier this month, the company released Microsoft Frontier Company, an outcome-driven engineering organization which will embed 6,000 engineering experts for customers to co-design and improve their AI systems.
“We’ve been testing this model over the past year, completing over 330 projects across 164 customers, including many of the world’s leading companies across industries,” Nadella said.
The company is seeing ROI from the infrastructure it already owns by optimizing across its silicon, systems, and software layers Nadella said. AI sovereignty is also top of mind for Microsoft customers, Nadella added.
“We are expanding our offerings to meet that need,” Nadella said.
The company has seen a fivefold increase in the number of customers building with models from multiple providers, Nadella said. Levi Strauss & Co., for example, is using models from OpenAI and Anthropic on Foundry to bring more than 1,000 domain-specific agents into a unified enterprise AI platform.
Microsoft is partnering with AI company Mistral to bring its models to Microsoft Sovereign Cloud, allowing customers to run them across public, customer-controlled, disconnected environments.
