Microsoft Corp (NASDAQ: MSFT) announced during its first-quarter earnings call that its artificial intelligence business is on track to surpass $10 billion in annual revenue run rate next quarter, marking the fastest-growing business segment in the company's history.
What Happened: CEO Satya Nadella highlighted the rapid adoption of AI across the company's product portfolio, emphasizing strong customer demand and widespread enterprise implementation.
"AI-driven transformation is changing work, work artifacts and workflow across every role, function, and business process, helping customers drive new growth and operating leverage," Nadella said during the earnings call.
"Our AI business is on track to surpass an annual revenue run rate of $10 billion next quarter, which will make it the fastest business in our history to reach this milestone," Nadella said.
Key developments driving AI growth include:
- Nearly 70% of Fortune 500 companies now use Microsoft 365 Copilot
- Azure OpenAI Service usage more than doubled over the past six months
- GitHub Copilot enterprise customers increased 55% quarter-over-quarter
Why It Matters: The company's Azure cloud service saw 33% growth, with AI services contributing approximately 12 points to that growth. However, Microsoft acknowledged that demand continues to exceed available capacity, prompting increased infrastructure investments.
The rapid growth in AI revenue comes as Microsoft reported overall revenue of $65.6 billion for the first quarter, up 16% year-over-year, with Microsoft Cloud revenue reaching $38.9 billion, representing 22% growth.
Price Action: Microsoft Corp's stock closed at $432.53 on Wednesday, up 0.13% for the day. In after-hours trading, the stock declined by 3.71%. Year-to-date, Microsoft shares have seen a notable gain of 16.63%, according to data from Benzinga Pro.