Microsoft’s AI business has reached a $37 billion annual revenue run rate, reflecting a 123% increase, as CEO Satya Nadella emphasizes the shift towards agentic computing.
Microsoft CEO Satya Nadella recently announced the company’s significant advancements in artificial intelligence, revealing that its AI business has surpassed a $37 billion annual revenue run rate. This milestone represents a remarkable 123% increase, underscoring the tech giant’s accelerating focus on AI technologies.
In a post on X, Nadella shared insights from the company’s latest quarterly earnings call, stating, “We are focused on delivering AI infrastructure and solutions that empower every business to eval-max their outcomes in this agentic computing era.” His comments reflect Microsoft’s growing confidence in what he describes as a pivotal technological shift.
“We are at the beginning of one of the most consequential platform shifts that will change the entire tech stack as we move from end-user driven workloads to workloads driven by end-users and agents,” Nadella noted, highlighting the transformative potential of AI in various sectors.
Microsoft’s financial results for the third quarter of fiscal year 2026 further illustrate this growth trajectory. For the quarter ending March 31, the company reported revenue of $82.9 billion, marking an 18% increase year over year. Operating income rose by 20% to $38.4 billion, while net income climbed 23% to $31.8 billion. Diluted earnings per share also saw a 23% increase, reaching $4.27.
The surge in revenue is largely attributed to the rapid expansion of Microsoft’s cloud and AI businesses. Microsoft Cloud revenue hit $54.5 billion, up 29%, with Azure and other cloud services experiencing a remarkable 40% growth. Additionally, commercial remaining performance obligations rose to $627 billion, indicating strong long-term demand for Microsoft’s offerings. The company’s Productivity and Business Processes segment grew by 17% to $35 billion, while Intelligent Cloud revenue increased by 30% to $34.7 billion. However, the More Personal Computing segment experienced a slight decline.
Nadella emphasized that the shift towards “agentic computing,” where AI agents play a central role in executing tasks, is expected to broaden the total addressable market and transform value creation across industries. “This will drive TAM expansion and change the value creation equation across the entire economy,” he stated.
To seize this opportunity, Microsoft is prioritizing two key areas: the development of AI infrastructure and the establishment of its agent platform. “We are building the world’s leading AI infrastructure and agent platform as agents proliferate and become the dominant workload,” Nadella explained.
The company is actively expanding its data center capacity to meet the growing demand for AI solutions. “All up, we added another gigawatt of capacity this quarter and remain on track to double our overall footprint in just two years,” he noted, emphasizing Microsoft’s commitment to aligning capacity with customer demand.
Additionally, Microsoft is witnessing increased adoption of its multi-model AI offerings. Nadella reported that 10,000 customers have utilized more than one model on Foundry, while 5,000 have engaged with open-source models. The company’s “IQ layers,” which encompass Microsoft 365, Fabric, and Foundry, are designed to provide an unmatched context engine for thousands of customers utilizing agents or developing their own.
The second priority for Microsoft involves deploying “high-value agentic systems” across critical domains such as productivity, coding, and security. In the realm of workplace productivity, Microsoft 365 Copilot has gained significant traction, with Nadella stating, “We had our fastest growth since launch and now have over 20 million M365 Copilot seats.” He added that weekly engagement with the tool is now comparable to that of Outlook.
In software development, the adoption of GitHub Copilot is also on the rise. “Nearly 140,000 organizations now use GitHub Copilot,” Nadella reported, noting that usage of GitHub Copilot CLI is “nearly doubling month-over-month.”
Microsoft’s security offerings are experiencing similar momentum, with a reported twofold increase in Security Copilot customers year-over-year.
Nadella’s remarks highlight the central role that AI plays in Microsoft’s strategic vision, as the company positions itself at the forefront of a rapidly evolving computing landscape driven by autonomous systems and intelligent agents. The ongoing investments in infrastructure to support this growth, including the addition of approximately one gigawatt of new capacity during the quarter, reflect Microsoft’s commitment to expanding its global footprint within the next two years.
According to The American Bazaar, these developments underscore Microsoft’s determination to lead in the AI sector as it navigates the complexities of the modern technological landscape.