Microsoft has reported impressive earnings for the most recent quarter, boasting revenues of $81.3 billion—an increase of 17%—and net income of $38.3 billion, up 21%. The tech giant’s cloud division also reached an all-time high, generating over $50 billion. However, following the announcement, stock prices fell as investors grew concerned about the company’s heavy investments in expanding its cloud infrastructure and whether those expenses would yield sufficient returns.
CEO Satya Nadella addressed these investor concerns during an earnings call, emphasizing a robust commitment to AI-centric growth. Microsoft has pumped nearly as much into capital expenditures in the first half of this fiscal year—$72.4 billion—nearly matching last year’s total of $88.2 billion. A significant portion of this investment is directed toward enhancing AI services for enterprises, particularly partnerships with OpenAI and Anthropic. Investors are keen to see if this expenditure translates into increased usage and profitability.
Market analysts have expressed skepticism, particularly noting that Microsoft’s top cloud offerings, Azure and Microsoft 365, did not meet growth expectations. UBS analyst Karl Keirstead commented on this dip, labeling it a notable concern but maintained a bullish outlook on Microsoft stock.
Despite earlier reports suggesting a tepid response to AI integration, Nadella highlighted a dramatic increase in users of consumer-focused AI products, claiming a near threefold year-over-year growth. However, he did not disclose specific user figures, raising questions about the actual scale of this growth.
Microsoft’s GitHub Copilot, coding-focused AI, has reached 4.7 million paid subscribers, reflecting a 75% increase year-over-year. In contrast, Microsoft 365 Copilot is now in use by 15 million paying users out of a total of 450 million paid seats, indicating significant traction.
Additionally, Nadella pointed to robust growth from Dragon Copilot, Microsoft’s healthcare AI solution, which is utilized by 100,000 medical providers and has contributed to documenting 21 million patient interactions this past quarter—an impressive threefold increase year-over-year.
As Microsoft continues to invest heavily in AI infrastructure, Nadella remains optimistic, asserting that the demand for AI services significantly exceeds current data center capacity, ensuring that these investments are poised for payoff in the near future.
