A few weeks ago, Scott Guthrie, one of Microsoft's most experienced programmers, was looking for an example to illustrate the excitement that artificial intelligence has caused through the company's products, which recently exceeded the three billion dollar mark and Apple that Scepter has taken over the most valuable company on the world stock exchange. Guthrie, who leads Azure, the tech giant's cloud computing platform, has decades of experience. He said the high demand was comparable to the high expectations raised by the introduction of Windows 95, the program that promised to revolutionize home computers and whose release led to queues at store entrances. For the youngest people who don't know what it's like to wait in line to buy an operating system, this comparison may not work and they can better imagine what artificial intelligence (AI) can do for the company founded by Bill Gates Company has meant when the reference is the anger that the launch of each new mobile model from Apple generates in consumers. And yes, Microsoft is living its iPhone moment.
The Redmond (Washington, USA)-based giant presented its second quarter results last week (it has a non-calendar fiscal year ending in June). A time when the company recorded record numbers thanks to its cloud services. Between October and December, Microsoft posted revenue of $62.02 billion, up 17%, and increased profits by 33% to $21.87 billion. “We have moved from discussing artificial intelligence to applying it at scale across all levels of our offering,” said Satya Nadella, the company’s CEO, during its conference call with analysts. Microsoft has been trying to sell itself to the public as an AI company for months. For this reason, the head of marketing was replaced in October after almost a decade in office. The witness was recorded by Takeshi Numoto, Azure's sales manager.
Shares are up 57% in the last year and the market capitalization is $3.08 trillion (more than three times the sum of all listed Spanish companies). This investor interest is largely due to the agreement Microsoft has had with OpenAI and its flagship product ChatGPT since 2019. The agreement between the parties was extended “long-term” last year, with the company securing $13 billion in sales under the chairmanship of Sam Altman. Each Microsoft share is worth $414, but analysts still see potential for further appreciation. Dan Ives of Wedbush Securities, a Los Angeles investment firm, puts his price target at $450, 8.6% above his current valuation.
Microsoft CEO Satya Nadella at a presentation in Las Vegas in January. Ethan Miller (GETTY IMAGES)
Amy Hood, the company's chief financial officer, said last week that much of the benefits achieved through Azure would come from increased use of AI. The company expects this trend to continue in 2024 as more companies integrate this technology. In fact, it was announced at the end of January that Vodafone would invest $1.5 billion in the cloud platform to transform the digital experience of 300 million users.
However, Microsoft's second youth also has its downsides. The tech giant laid off more than 20,000 employees in 2023, mostly salespeople and customer service employees. Recently, the company announced further cuts to its gaming division, Microsoft Gaming, laying off 1,900 employees, or 8% of the total. Most worked at Activision Blizzard, a company it acquired last year.
To establish itself at the forefront of the AI revolution, a position that Microsoft leads alongside Nvidia and AMD, the company wants to attract not only large companies as customers, but also medium and small companies. In this sense, last June began the marketing of Copilot, a program that uses ChatGPT 4 as an engine and is aimed at small businesses. With that in mind, Microsoft launched a $20 subscription last December aimed at entrepreneurs looking to automate their businesses.
“The results were impressive,” said Rajesh Jha, vice president of experience and devices, at an event organized by Barclays last month. “Between 68% and 72% of users recognize that Copilot has made them more efficient and improved the quality of their work, allowing them to focus on what is actually human work: creative, reflective or collaborative… More than 55% of users “feel more creative with AI,” emphasized Jha.
Microsoft says it has 1.3 million subscribers to its GitHub Copilot service, which allows programmers to write code using AI. The number of subscribers to the program has increased by 30% in the last three months. The strategy through the end of 2023 was to sell the tool to large enterprises for a minimum subscription of $300 per month ($30 per user). But Copilot will also be available to anyone who has Office in the cloud and can use it to create content in the company's programs such as Excel, PowerPoint and Office, which has 400 million paid downloads.
One in three users of the Microsoft 365 platform say that AI researches, writes and summarizes tasks faster. In the last two months, Microsoft has signed deals with companies like Honda and Pfizer to make Copilot available to all of their employees. The company believes the use of technology will be so commonplace that it has made the first major modification to its keyboards in three decades, incorporating a button to launch Assistant. “In 2024, AI will be a first-class component of all computers,” said the company’s top executive.
According to Nadella, AI has caused Windows downloads to increase by 50% compared to last year. Yes, there are people lining up to use the latest Microsoft operating system. Unlike Windows 95, no one sees these long queues. And all thanks to the cloud and the popularization of AI.
Follow all information Business And Business on Facebook and Xor in our weekly newsletter
The five-day agenda
The most important business quotes of the day, with the keys and context to understand their significance.
RECEIVE IT IN YOUR EMAIL