Microsoft has revealed that its AI business is on track to surpass a $10 billion annual revenue run rate next quarter, making it the fastest business in the company’s history to reach this milestone. The company’s CEO, Satya Nadella, attributes this growth to Microsoft’s partnership with OpenAI, the creator of ChatGPT. Microsoft disclosed in its quarterly regulatory filing that it has made total funding commitments of $13 billion to OpenAI.
However, Microsoft also acknowledged that losses from its stake in OpenAI were partly responsible for a $683 million expense related to its equity investments in the quarter. The company’s CFO, Amy Hood, expects this expense to increase significantly in the next quarter, primarily driven by Microsoft’s share of the expected loss from OpenAI. Despite these losses, Nadella emphasized that the partnership has been mutually beneficial, with Microsoft providing infrastructure for OpenAI’s innovations and leveraging the resulting AI models.
Microsoft’s AI services contributed 12 percentage points to a 33% increase in Azure cloud revenue in the quarter, and usage of Microsoft’s Azure OpenAI service has doubled in the last six months. The company remains committed to growing its leadership position in AI across its entire Microsoft Cloud while maintaining a disciplined focus on cost management and prioritization.