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

Microsoft reported strong financial results on Wednesday, posting $81.3 billion in revenue for the quarter, up 17% year over year and well above Wall Street expectations. Net income climbed 21% to $38.3 billion, while Microsoft Cloud revenue surpassed $50 billion for the first time.

Despite the solid earnings, Microsoft shares fell sharply on Thursday as investors focused on the company’s rapidly rising spending on cloud infrastructure and questioned whether those investments would translate into long-term returns. Microsoft CEO Satya Nadella used a significant portion of the earnings call to argue that the spending is already paying off, driven by strong demand for the company’s AI products.

Microsoft has spent nearly as much on capital expenditures in the first half of its current fiscal year as it did in the entire previous year. The scale of that spending is substantial: the company invested $88.2 billion in capital expenditures last year and has already spent $72.4 billion so far this year. Much of that investment is aimed at expanding data centre capacity to support AI workloads for enterprises and major AI labs, particularly OpenAI and Anthropic.

The central concern for investors is whether that massive spending will translate into increased usage and, ultimately, higher profits. Some investors were disappointed that Microsoft’s core enterprise cloud business, Azure, along with its Microsoft 365 applications, did not grow as quickly as expected.

“The fact that BOTH Azure and the M365 segments fell a bit short is the key negative we’re hearing,” wrote UBS Wall Street analyst Karl Keirstead in a research note on Thursday. Keirstead added that he is not overly concerned and continues to recommend buying the stock.

Still, earlier this year, reports circulated suggesting that users were not particularly enthusiastic about Microsoft’s AI offerings, even as Copilot features were embedded across Windows, Office, and other Microsoft products.

During the earnings call, Nadella firmly pushed back on that narrative, emphasising growing adoption across Microsoft’s AI portfolio, though some of the figures he shared were broad rather than precise. Nadella said daily users of Microsoft’s consumer Copilot products grew “nearly 3x year-over-year.” He said that figure includes AI chats, the news feed, search, browsing, shopping, and Copilot integrations built directly into the operating system. He did not disclose the total number of daily users represented by that growth.

In Microsoft’s annual report last year, the company said it had surpassed 100 million monthly active Copilot users, a figure that combined both enterprise customers and consumers.

Nadella was more specific when discussing GitHub Copilot, Microsoft’s coding-focused AI product. He said GitHub Copilot now has 4.7 million paid subscribers, representing 75% year-over-year growth. In last year’s annual report, Microsoft noted GitHub Copilot had 20 million total users, including those on free plans.

He also said Microsoft 365 Copilot has reached 15 million paid seats as companies continue rolling out the tool to employees. Microsoft said it has roughly 450 million paid Microsoft 365 seats overall, underscoring the room for further Copilot adoption.

Nadella also pointed to growth in Dragon Copilot, Microsoft’s healthcare-focused AI agent for medical professionals. The product, which competes with startups such as Harvey, is now available to 100,000 medical providers. Nadella said Dragon Copilot was used to document 21 million patient encounters during the quarter, a threefold year-over-year increase.

As for whether Microsoft’s enormous data centre investments will ultimately be worth it, Nadella and CFO Amy Hood said demand for AI services across Microsoft’s products continues to exceed available supply. According to the company, its new data centre capacity is effectively booked for its entire lifespan, suggesting that the heavy spending is already being absorbed by customer demand.