Microsoft announced strong quarterly results on Wednesday, reporting $81.3 billion in revenue—a 17% increase—along with net income of $38.3 billion, which rose 21%. The company also achieved a milestone, with Microsoft Cloud revenue exceeding $50 billion. Despite these positive figures, the stock faced significant pressure on Thursday as investors expressed concerns over the tech giant's substantial spending to expand its cloud infrastructure and questioned whether these investments would yield returns. Microsoft CEO Satya Nadella addressed these worries directly, dedicating considerable time during the earnings call to argue that the spending is justified.

The scale of investment is striking: in the first half of its current fiscal year, Microsoft has already committed $72.4 billion to capital expenditures, approaching the $88.2 billion spent throughout the entire previous year. A large portion of this expenditure is directed toward supporting AI services for enterprises and leading AI labs, including OpenAI and Anthropic. The central concern among investors is whether this massive outlay will translate into increased usage and, ultimately, greater profitability. There is particular anxiety that growth in Microsoft's core enterprise cloud offerings, Azure, and its Microsoft 365 applications, did not meet expectations. "The fact that BOTH Azure and the M365 segments fell a bit short is the key negative we’re hearing," noted UBS Wall Street analyst Karl Keirstead in his research on Thursday. However, Keirstead remains optimistic, recommending that investors buy the stock.

This investor skepticism follows earlier reports suggesting limited interest in Microsoft's AI tools, even with Copilot integrated across its product suite. During the earnings call, Nadella focused heavily on promoting AI adoption, though some of the metrics he shared lacked precise detail. For example, he mentioned that daily users of its consumer Copilot AI products had grown "nearly 3x year over year," a figure encompassing AI chats, news feeds, search, browsing, shopping, and OS integrations. He did not, however, specify the actual number of users this represents.

In contrast, Nadella provided clearer figures for other AI services. He reported that GitHub Copilot now has 4.7 million paid subscribers, marking a 75% year-over-year increase—a sign of robust growth. Last year's annual report noted that GitHub Copilot had 20 million users, including those on free plans. Additionally, Microsoft 365 Copilot has reached 15 million paid seats sold to companies, out of a total base of 450 million paid seats. Nadella also highlighted Dragon Copilot, Microsoft's healthcare AI agent for medical professionals, which is available to 100,000 providers and was used to document 21 million patient encounters last quarter, a threefold increase from the previous year.

The critical question remains: will the billions spent on data centers prove worthwhile? Nadella firmly believes so. Both he and CFO Amy Hood emphasized on the call that demand for AI services currently exceeds data center capacity, meaning new infrastructure is effectively fully utilized for its operational life.