Microsoft Prioritizes AI Compute for Copilot Over Azure, Limiting Growth to 39%

Microsoft Chief Financial Officer Amy Hood said on the January earnings call that the company prioritizes compute capacity for its own AI product growth, followed by long-term research and innovation, and finally Azure customer demand. Hood noted that if all GPUs deployed in the first half of the fiscal year had been allocated to Azure, its growth rate could have exceeded 40% instead of the actual 39%.

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

In February 2023, Microsoft launched an AI-powered Bing search and subsequently integrated generative AI into core products including Office, Windows, and GitHub. Microsoft 365 has long been one of Microsoft's most stable cash generators, with an increasing number of users writing documents, summarizing content, and generating tables and presentations using AI tools. GitHub Copilot faces competition from AI coding tools such as Cursor and Anthropic's Claude Code, and Microsoft has internally discussed how to reform GitHub to respond. GitHub experienced multiple major service outages this year. Microsoft reorganized division responsibilities, with CEO Satya Nadella giving more commercial business to Judson Althoff while he and the core engineering team further focus on AI.