Microsoft Prioritizes AI Compute for 365 Copilot and GitHub Copilot Over Azure Clients

Microsoft Chief Financial Officer Amy Hood stated in a January earnings call that the company first meets the compute needs of its own AI product growth, then long-term R&D and innovation, and finally Azure customer demand. Hood gave an example: if all GPUs deployed in the first half of the fiscal year had been allocated to Azure, the growth rate would have exceeded 40% instead of the actual 39%.

Azure sales teams have seen their quotas raised by up to 30% this year. After a series of failures on GitHub, Microsoft turned to Amazon's cloud capacity to relieve pressure and also explored renting Oracle infrastructure, but that effort did not advance due to security and compliance concerns.

Microsoft launched an AI-powered Bing search in February 2023 and then integrated generative AI into core products such as Office, Windows, and GitHub. Microsoft 365 has long been one of Microsoft's most stable cash cows, with an increasing number of users writing documents, summarising, generating tables, and creating presentations within AI tools. GitHub Copilot faces competition from AI coding tools such as Cursor and Anthropic's Claude Code, and Microsoft has held internal discussions on how to reform GitHub in response. GitHub experienced multiple major service outages this year. Microsoft has reorganized its division structure: CEO Satya Nadella has delegated more commercial responsibilities to Judson Althoff, while he and the core engineering team further focus on AI.