Microsoft is once again at the center of the debate about the economic viability of artificial intelligence. The company is investing in AI infrastructure on an unprecedented scale, but the associated returns are slower to materialize than many investors had hoped.
This tension became painfully apparent after the publication of the quarterly figures, when the share price clearly lost ground, according to Reuters. The message from Redmond is clear: if you want to stay ahead in AI, you have to invest now. That means billions in data centers, chips, and memory, with direct consequences for the cost structure.
Although revenue continues to grow strongly, expenditure is rising faster. For the market, this is a signal that profitability could come under pressure, especially if the growth of cloud services levels off.
Azure growth slows
Azure continues to grow, but not at the pace Microsoft achieved in previous years. In a market where virtually every major tech player is heavily invested in AI, it is becoming increasingly difficult to differentiate yourself purely on scale or technology. Customers are spreading their risks, experimenting with multiple platforms, and are more critical of price and performance. This makes it more difficult to recoup investments quickly.
The collaboration with OpenAI plays a dual role. On the one hand, it gave Microsoft an early and visible position in generative AI, resulting in the rapid integration of new features into existing products. On the other hand, the strong interdependence means that a significant portion of future cloud revenue depends on a single party. Now that OpenAI has more freedom to purchase capacity elsewhere, that dependence is becoming more visible and less comfortable for investors.
Copilot must embed AI
Microsoft emphasizes that the value of AI lies not only in cloud consumption but also in software. With Copilot, the company is trying to embed AI into organizations’ daily work processes. This strategy aligns with Microsoft’s historical strength: building platforms that are used for years and gradually deliver more value. Microsoft presents Copilot’s success as proof that AI is slowly but surely finding its way into structural revenue.
However, the broader context is making investors cautious. Big Tech’s combined AI spending is reaching levels previously seen only in large-scale infrastructure projects. As long as it remains unclear how quickly these investments will translate into higher margins, any indication of slowing growth will carry significant weight.
For Microsoft, this means that it must not only continue to lead technologically, but also convincingly demonstrate that AI delivers a sustainable revenue model. The coming quarters will therefore be less a measure of technology and more a measure of finance for the company’s AI strategy.