Satya Nadella, Chair and Chief Executive Officer of Microsoft, says the software major continues to push the boundaries of AI innovation and adoption, driving significant revenue growth.
Microsoft’s earnings report for Q2 fiscal 2025 indicated that Microsoft Cloud revenue surpassed $40 billion for the first time, growing 21 percent year over year, while AI business alone has exceeded an annual revenue run rate of $13 billion, marking a 175 percent increase.
AI scaling laws continue to deliver efficiency gains, with inference achieving more than 2x price-performance improvements per hardware generation and over 10x per model generation through software optimizations.
To meet the surging demand for AI, Microsoft is aggressively scaling its infrastructure globally, balancing training and inference workloads, and doubling data center capacity over the last three years. Capex (capital expenditure) of Microsoft was $22.6 billion.
Azure serves as the AI infrastructure backbone, expanding data center capacity based on demand signals. Microsoft has invested more in capacity expansion in the past year than ever before, integrating data centers, networks, racks, and silicon into a cohesive system for next-gen AI workloads.
Microsoft Fabric has emerged as a key driver in the data layer, with over 19,000 paid customers, making it the fastest-growing analytics product in company history. Power BI’s integration with Fabric has resulted in over 30 million monthly active users, a 40 percent increase. The AI-driven data patterns have spurred the expansion of Azure OpenAI apps, doubling in number and significantly increasing adoption across SQL, hyperscale, and Cosmos DB.
Microsoft’s AI platform and tools continue to strengthen with OpenAI committing to Azure as its exclusive cloud provider. Azure AI Foundry is gaining traction, with over 200,000 monthly active users in just two months, providing top-tier tools for building AI agents, multi-agent applications, and AIOps. The platform supports OpenAI’s latest models alongside the best selection of open-source models and SLMs, including DeepSeek’s R1 and Microsoft’s own Phi family of SLMs, which have been downloaded over 20 million times.
Industry-specific AI models are also flourishing, with more than 30 models from partners like Bayer, PAYG AI, and Siemens. GitHub Copilot is transforming software development, being widely adopted by digital-native companies like ASOS and Spotify as well as large enterprises such as HP, HSBC, and KPMG. GitHub now hosts 150 million developers, a 50 percent increase in two years, and saw over 1 million sign-ups for Copilot in its first post-launch week.
Microsoft 365 Copilot is redefining AI-powered productivity, helping businesses streamline workflows with intelligent agents. Customers who purchased Copilot in the first quarter have expanded their seats more than 10x over 18 months.
Organizations like Novartis, Barclays, Carrier Group, Pearson, and the University of Miami have embraced Copilot at scale, with Novartis alone reaching 40,000 seats. Daily active users more than doubled quarter over quarter, while usage intensity grew by 60 percent.
Copilot Chat and Copilot Studio are democratizing AI agent creation, with over 160,000 organizations using Copilot Studio to build 400,000 custom agents in three months, doubling quarter over quarter.
Microsoft has introduced first-party AI agents for meetings, project management, HR, IT, and SharePoint data access while fostering third-party integrations with Adobe, SAP, ServiceNow, and Workday.
Copilot is at the heart of Microsoft’s enterprise knowledge cloud, a rapidly growing data repository of billions of emails, documents, chats, Teams meetings, and SharePoint sites, expanding by 25 percent year over year.
AI-driven Copilot and agents are reshaping business applications, with Dynamics 365 capturing market share as companies like Ecolab, Lenovo, and TotalEnergies transition from legacy providers to Microsoft’s AI-powered solutions.
In healthcare, DAX Copilot now facilitates over 2 million monthly physician-patient encounters, growing 54 percent quarter over quarter and improving productivity for top providers like Mass General Brigham, Michigan Medicine, and Vanderbilt University Medical Center.
Windows is experiencing momentum with increased enterprise adoption of Windows 11, particularly as Windows 10 approaches the end of support. Copilot+ PCs are driving AI adoption in personal computing, with 15 percent of premium-priced laptops in the U.S. during the holiday season featuring Copilot+ capabilities.
Microsoft anticipates that the majority of new PCs in the coming years will be Copilot+ enabled, as developers from Adobe, CapCut, and WhatsApp continue to build AI-powered applications that leverage built-in NPUs.
Through strategic investments in AI infrastructure, models, and applications, Microsoft is solidifying its leadership in the AI era, setting the stage for continued innovation and business transformation.
Rajani Baburajan
