Satya Nadella insists people are using Microsoft’s Copilot AI a lot  

Microsoft delivered a stable earnings report on Wednesday with $81.3 billion in income for the quarter (up 17%), web earnings earnings of $38.3 billion (up 21%), and a record-breaking Microsoft cloud income of over $50 billion. 

However the inventory was getting pounded on Thursday as traders nervous about how a lot the tech large was spending to construct out its cloud and questioned whether or not that funding would repay. Microsoft CEO Satya Nadella says the reply to that query is sure  — and spent appreciable time on the earnings name attempting to make that time.

Microsoft has spent virtually as a lot on capital expenditures within the first half of its present fiscal 12 months because it did in the entire earlier 12 months. And the numbers really are huge: Microsoft spent $88.2 billion on capital expenditures final 12 months and has spent $72.4 billion up to now this 12 months. 

A lot of that spend is to serve AI to enterprises and main AI labs, particularly OpenAI, in addition to Anthropic. The large query on traders’ minds is: Will the spending flip into extra use and in the end earnings?  

Traders are scared that Microsoft’s important enterprise cloud product, Azure, and its Microsoft 365 apps didn’t develop as quick as they needed.

“The truth that BOTH Azure and the M365 segments fell a bit brief is the important thing adverse we’re listening to,” Wall Road analyst for UBS, Karl Keirstead, wrote in his analysis word on Thursday. (Keirstead isn’t nervous about it, although, and recommends shopping for the inventory.)

Nonetheless, a couple of months in the past, information experiences circulated that folks didn’t actually need to use Microsoft’s AI, regardless of Copilot being weaved into all types of Microsoft merchandise.  

Nadella spent a lot of his time throughout the earnings name engaged in what’s finest described as AI use PR. Regardless of his pitch, a number of the numbers he gave had been fairly squishy.  

As an example, Nadella mentioned each day customers of its shopper Copilot AI merchandise had grown “practically 3x year-over-year.” This refers to AI chats, the information feed, search, looking, purchasing, and “integrations into the working system.”  

As to what number of precise customers that represents, he didn’t say. (We’ve reached out to Microsoft and requested.)

Final 12 months, in its annual report, the corporate mentioned it surpassed 100 million month-to-month energetic Copilot customers, however that counted each industrial customers and customers.  

He was extra up entrance with Microsoft’s coding AI, GitHub Copilot, saying it now has 4.7 million paid subscribers, up 75% year-over-year. That seems to be a wholesome enterprise. Final 12 months, in its annual report, Microsoft mentioned that GitHub Copilot had 20 million customers, a determine that features these choosing the free tier.  

He additionally mentioned Microsoft 365 Copilot now has 15 million paid seats from firms shopping for it for his or her workers. That is out of a base of 450 million paid seats, the corporate mentioned.

And Nadella known as out the expansion of Dragon Copilot, Microsoft’s healthcare AI agent for medical professionals (a competitor to superhot startup Harvey). He mentioned this product is accessible to 100,000 medical suppliers and was used to doc 21 million affected person encounters over the quarter, up threefold year-over-year. 

Will the billions spent on knowledge facilities be price it? Nadella clearly thinks so. He and CFO Amy Hood mentioned on the earnings name that demand for AI providers throughout merchandise far outstrips knowledge heart provide, so the entire new gear is actually booked to capability for its lifespan.