AI is an expensive business, costing upwards of $100 million simply to train a new model.
At Microsoft, though, a multi-billion dollar investment in AI appears to be paying off: CEO Satya Nadella said on a quarterly earnings call on Wednesday that Microsoft’s AI business “is on track to surpass an annual revenue run rate of $10 billion next quarter” and become “the fastest business in our history to reach this milestone.”
The annual revenue run rate projects revenue over a period of time based on previous revenue.
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Microsoft has invested about $14 billion into OpenAI, the company behind ChatGPT. It has also made several multi-billion dollar AI commitments, including a deal to reopen Three Mile Island, a nuclear power plant near Harrisburg, Pennsylvania.
Microsoft CEO Satya Nadella. Photo by Ethan Miller/Getty Images
Nadella also pointed out on the call, which went over earnings for the first quarter of fiscal year 2025, that Microsoft Cloud revenue was up 22% year over year, growing to $38.9 billion for the quarter ending September 30. Revenue overall increased 16% to $65.6 billion.
At Microsoft, “AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process,” Nadella said.
Though Microsoft’s earnings were better than expected, the company’s shares fell by more than 5% on Thursday because its predicted cloud revenue growth was less than expected.
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Nadella was well-compensated for leading Microsoft: He received a pay increase of over $30 million for the fiscal year ending June 30, resulting in an overall pay of $79.1 million compared to $48.5 million a year prior.
Nadella’s compensation would have been $5.5 million higher, but he asked for it to be lower following a series of cybersecurity breaches.
Meanwhile, Microsoft went through layoffs affecting nearly 1,900 people in its gaming division in January.
Microsoft now has about 228,000 employees globally.