Microsoft Surpasses $40 Billion in Cloud Revenue for First Time, AI Business Hits $13 Billion Annual Run Rate
Microsoft has made significant strides in its cloud business, surpassing $40 billion in revenue for the first time in a single quarter. The company's Chairman and Chief Executive Officer, Satya Nadella, highlighted this achievement during the Microsoft Fiscal Year 2025 Second Quarter Earnings Conference Call on January 29.
According to Nadella, Microsoft Cloud has seen continued strength, with enterprises beginning to move from proof of concepts to enterprise-wide deployments. This is expected to unlock the full return on investment (ROI) for AI. The company's AI business has now surpassed an annual revenue run rate of $13 billion, up 175% year-over-year.
Nadella also discussed Microsoft's approach to managing its fleet and allocating capital to compute. He noted that AI scaling laws continue to compound across both pretraining and inference time compute, leading to significant efficiency gains in training and inference. The company has seen more than 2x price performance gain for every hardware generation and more than 10x for every model generation due to software optimizations.
Microsoft's focus on scaling its fleet globally and maintaining the right balance across training and inference as well as geo distribution is expected to drive exponential demand for AI. This is in line with the company's approach to continuously scaling its commercial cloud.
The infrastructure layer for AI, Azure, has seen significant expansion of data center capacity in line with near-term and long-term demand signals. Microsoft has more than doubled its overall data center capacity in the last 3 years and added more capacity last year than any other year in its history.
Microsoft's Chairman and Chief Executive Officer emphasized that the company is taking advantage of Moore's Law, refreshing its fleet with support for the latest from AMD, Intel, NVIDIA, as well as first-party silicon innovation from Maia, Cobalt, Boost, and HSM.
