Last week, Microsoft released its financial results for Q2 FY25, reporting a 12% growth in revenue, which translates to approximately $69.6 billion. The Redmond giant's Commercial Cloud segment revenue, including cloud services sales, saw a 21% growth in revenue, translating to $40 billion. Its intelligent cloud business saw $25.5 billion in revenue.
Microsoft leverages its cloud services to power its AI efforts. However, investors are seemingly concerned about the company's exorbitant spending on AI, especially with the emergence of DeepSeek's ultra-cost-effective AI model, which was developed at a fraction of the cost of proprietary models like ChatGPT and Copilot.
Interestingly, Microsoft CEO Satya Nadella sees the emergence of DeepSeek's R1 AI model and other iterations as good for business amid Azure's slow growth rate. According to the executive:
"AI will be much more ubiquitous. And so, therefore, for a hyperscaler like us and a PC platform provider like us, this is all good news as far as I'm concerned."
OpenAI and SoftBank announced their $500 billion commitment to the Stargate project, which will facilitate the construction of data centers across the United States for sophisticated advances. Microsoft CEO Satya Nadella revealed that the company spends up to $80 billion annually to build Azure.
DeepSeek has some real innovations. When token prices fall, inference computing prices fall, that means people can consume more, and there'll be more apps written.
Microsoft CEO, Satya Nadella
Microsoft employees encouraged to stay the AI course
In a leaked internal memo seen by Business Insider, Microsoft chief financial officer Amy Hood urged employees to remain focused and build toward the company's AI goals.
According to Hood:
"There has been a lot of AI-related news this week, but our focus is clear: delivering real-world AI solutions while simultaneously globally scaling our cloud and AI infrastructure to support our partners and customers as they adopt, build, and grow as well. As a company, we remain steadfast in the priorities which are required to deliver on that product promise — security, quality, and AI innovation. Thank you for your focus as we work together for our customers who rely on us."
This isn't the first time Microsoft has been placed on the spot for its exorbitant spending in AI. Last year, investors questioned the company's spending on AI, raising concerns over the little profit returns from its ventures in the landscape. Reports suggest that Microsoft is struggling to establish growth in the category, with consumers showing little interest in its Copilot AI monthly subscription service plan — Copilot Pro.
