News

Microsoft's Latest Earnings Report Was a Copilot Rollcall

• By David Ramel
• August 02, 2024

It was Copilots all the way down during Microsoft's fiscal Q4 2024 earnings call this week.

The company reported $64.7 billion in revenue for the period, up 15 percent year over year. Each of its business units grew by double digits over the quarter. Total revenue for the full fiscal year was $245.1 billion, a 16 percent increase from last year.

With AI now foundational to much of Microsoft's products, CEO Satya Nadella took the earnings call as an opportunity to spotlight Copilot's contributions to the company's bottom line.

'About Microsoft'
The change in the company is evidenced by the new "About Microsoft" verbiage in the news release accompanying yesterday's earnings call:

Microsoft (Nasdaq "MSFT" @microsoft) creates platforms and tools powered by AI to deliver innovative solutions that meet the evolving needs of our customers. The technology company is committed to making AI available broadly and doing so responsibly, with a mission to empower every person and every organization on the planet to achieve more.

That's certainly not how Microsoft used to describe itself. In a news release from April it said:

Microsoft (Nasdaq "MSFT" @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.

Back in 2016 it was:

Microsoft (Nasdaq "MSFT" @microsoft) is the leading platform and productivity company for the mobile-first, cloud-first world, and its mission is to empower every person and every organization on the planet to achieve more.

Clearly, the company's mission has changed throughout the years from software to mobile/cloud to "intelligent" products/services to nearly full-on AI.

The Numbers
Furthering the point are voluminous stats and observations Nadella cited, mentioning "Copilot" dozens of times.

• GitHub Copilot is by far the most widely adopted AI-powered developer tool.
• Just over two years since its general availability, more than 77,000 organizations -- from BBVA, FedEx, and H&M, to Infosys and Paytm -- have adopted Copilot, up 180 percent year-over-year.
• Copilot is driving GitHub growth, and all up, GitHub's annual revenue run rate is now $2 billion.
• Copilot accounted for over 40 percent of GitHub's revenue growth this year, and is already a larger business than all of GitHub was when we acquired it.
• Copilot for Microsoft 365 is becoming a daily habit for knowledge workers, as it transforms work, workflow, and work artifacts.
• The number of people who use Copilot daily at work nearly doubled quarter-over-quarter, as they use it to complete tasks faster, hold more effective meetings, and automate business workflows and processes.
• Copilot customers increased more than 60 percent quarter-over-quarter.
• New Team Copilot can facilitate meetings, and create and assign tasks.
• And, with Copilot Studio, customers can extend Copilot for Microsoft 365 and build custom copilots that proactively respond to data and events using their own first and third-party business data.
• To date, 50,000 organizations -- from Carnival Corp., Cognizant, and Eaton, to KPMG, Majesco, and McKinsey -- have used Copilot Studio, up over 70 percent quarter-over-quarter.
• We are also extending Copilot to specific industries, including healthcare, with DAX Copilot.
• More than 400 healthcare organizations -- including Community Health Network, Intermountain, Northwestern Memorial Healthcare, and Ohio State University Wexner Medical Center -- have purchased DAX Copilot to date, up over 40 percent quarter-over-quarter.
• Copilot is also transforming ERP and CRM business applications.
• Our new Dynamics 365 Contact Center is a Copilot-first solution that infuses generative AI throughout the contact center workflow.
• When it comes to devices, we introduced our new category of Copilot+ PCs this quarter.
• We are delighted by early reviews. And we are looking forward to the introduction of more Copilot+ PCs powered by all of our silicon and OEM partners in the coming months.
• Over 1,000 paid customers have used Copilot for Security, including Alaska Airlines, Oregon State University, Petrofac, Wipro, WTW.
• We are ensuring that Bing, Edge, and Copilot are collectively driving more engagement and value to end-users, publishers, and advertisers.
• And we continue to drive record engagement with Copilot for the web. Consumers have used Copilot to create over 12 billion images and conduct 13 billion chats to date, up 150 percent since the start of the calendar year.
• And Copilot in Microsoft Ad Platform helps marketers create campaigns and troubleshoot using natural language.

Revealing Question
And here's a little Q&A with analyst Mark Murphy from JP Morgan that delves into the details of the potential impact of Copilot's non-dev AI assistance.

Murphy: With a couple quarters of Copilot for M365 availability under your belt now, how are you assessing the capability of copilots to replicate the productivity gains that they've created for developers, which seem to be very high, and to do something similar for the broader population of knowledge workers? For instance, you're mentioning the 10,000 seat deals, the repeat purchases. Is it possible to eventually see Copilot penetration rates equally high in Office as they will be in GitHub?

Nadella: Yeah, that's a great question. In fact, the GitHub design system and the GitHub Copilot Workspace design system, which now, for example, you start with an issue, you create a plan, from a plan, you create a spec, or you create a spec and from a spec, you create a plan, and then you go operate across the full repo, that's effectively the design system that is getting replicated inside of even the M365 Copilot. And you see this even now.

For example, you get an e-mail. You're in sales. You want to respond to the customer. The data from the e-mail is essentially context for a prompt, but you expand by bringing in all of your CRM data, right? This customer e-mail is in the context of some order. All of the CRM record gets completed in context, and a reply gets generated with the CRM data. That's the type of stuff that's already happening.

Then you take something like Copilot Studio, you can start even grounding it in more data and then completing workflows. You could say, if this e-mail comes from this customer whose order date has got a particular issue with it, you can then go and escalate it to somebody else, who gets a notification in Teams. And those are the kinds of workflows that are getting built within IT or by end users themselves. What used to be line of business applications to us are Copilot extensions going forward.

We think of this as really, a new design system for knowledge and frontline work to drive productivity, which will be very akin to what has happened in software engineering. When you think about marketing or finance, or sales, or customer service, we will effectively replicate what you just said, which is the type of product you will be seeing and developers will come to all of these functions as they think about their work, workflow and work artifact all being driven by Copilot.

"Our strong performance this fiscal year speaks both to our innovation and to the trust customers continue to place in Microsoft," Nadella said in the accompanying news release. "As a platform company, we are focused on meeting the mission-critical needs of our customers across our at-scale platforms today, while also ensuring we lead the AI era."

So when do we start calling Microsoft an AI company?