The news: Microsoft’s AI push is gaining traction in enterprise, but while Copilot and OpenAI generative AI (genAI) integrations generate headlines, they haven’t yet delivered the revenue boost many expected.
Microsoft’s $70.1 billion quarter did beat forecasts, but the gains came mostly from traditional Azure cloud—not from AI workloads.
- In Q1 FY25, businesses created over 1 million custom agents using Copilot Studio, showing strong enterprise engagement.
- AI demand is not yet driving a meaningful uptick in Microsoft’s top-line results, which could delay further infrastructure investments.
Infrastructure strains threaten momentum: Global revenues from conversational AI services will more than double from $15 billion in 2025 to $31 billion by 2029, per Juniper Research. Yet Microsoft, a key player in this space, is already signaling strain.
Microsoft’s $1 billion data center project in Ohio was recently scrapped. Expansion plans to build more cloud infrastructure in Indonesia, the UK, Australia, and other parts of the US are also on hold or delayed.
Microsoft may slow future data center expansion to curb costs as it evaluates tariff effects.
- CFO Amy Hood acknowledged AI capacity constraints could start in June.
- Power and space shortages could stall wider AI growth just as enterprise demand heats up.
The challenge: Microsoft is hitting early success with Copilot adoption, but growth is outpacing its ability to scale infrastructure.
Enterprise leaders should monitor where Microsoft prioritizes capacity next—AI tools may become harder to access or more expensive as competition for cloud compute intensifies.
Our take: Enterprise tech buyers should push for clarity from Microsoft on AI capacity roadmaps. For those building AI into workflows, considering multi-cloud strategies or alternative providers might mitigate risk from future bottlenecks.