Microsoft recently reported strong earnings, with revenue of $81.3 billion (up 17%) and a net income of $38.3 billion (up 21%) for the quarter, and a record cloud revenue exceeding $50 billion. Despite this, investors expressed concerns about the company’s substantial spending on cloud infrastructure, which matched last year’s total capital expenditures of $88.2 billion, with $72.4 billion already spent this year.
Much of this investment is directed toward AI development, particularly with OpenAI and Anthropic. Investors are questioning whether this significant spending will lead to increased usage and profits, especially as Azure and Microsoft 365 have not grown as quickly as anticipated.
During the earnings call, CEO Satya Nadella attempted to reassure investors, highlighting the growth of AI products such as Copilot, which claimed a nearly threefold increase in daily users year-over-year, though no specific user numbers were provided. For GitHub Copilot, there are now 4.7 million paid subscribers, up 75% from the previous year, and Microsoft 365 Copilot has seen 15 million paid seats purchased.
In addition, Nadella noted substantial growth for Dragon Copilot, Microsoft’s healthcare AI, which reached 100,000 providers and documented 21 million patient encounters in the past quarter.
Despite some skepticism from analysts, Nadella believes that high demand for AI services justifies the multi-billion dollar investments in data centers, claiming that new equipment is largely pre-reserved due to capacity constraints.
Source link
