Microsoft 365 Copilot just hit the market yesterday…
Expectations are sky-high for the service with investment banking firm Piper Sandler calling it Microsoft’s “iPhone” moment.
Could this be the start of the AI future that was promised to investors at the beginning of 2023?
It may just be…
And Microsoft certainly looks to be leading the way!
Here are the reasons why I think the company has set itself up very nicely for the coming quarters:
Cloud AI Services
The company’s most recent earnings report was an absolute banger…
A lot of that had to do with the performance of Azure – Microsoft’s cloud computing platform.
It became very clear on the earnings call though that most of that stellar performance came from the success of the various AI cloud offerings!
What kind of numbers are we talking about?
The company said that 3 points of the 29% growth in Azure cloud revenue came from AI, beating the 2 points predicted going into the quarter…
That comes out to over $900 million in revenue just from cloud-based AI services alone!
This is pretty impressive considering that we are very early in the monetization of AI.
I expect to see this number grow even more in 2024…
Copilot
Microsoft’s latest AI offering will be sold for $30 per month in addition to the $23 that Microsoft 365 users already pay.
While the monthly fee may not sound like a lot, the global user base for the base service is substantial!
There are currently around 345 million active consumer and enterprise subscribers for Microsoft 365…
Even if the company is only able to convert a fraction of them to Copilot, it would still be a sizable revenue stream for the company.
On the other hand…
There’s also a good chance that Microsoft will be able to boost the overall user base for 365 given the additional value that Copilot provides to the software.
Alphabet is also looking to launch a similar product at the $30 per month price point.
With that said, I believe they will struggle to generate the same sort of numbers that Microsoft can pull off given that their enterprise market share is significantly smaller.
Zooming out…
Whether you’re looking at Azure or Copilot, Microsoft have set themselves up to do very well in 2024 and beyond!
Until Next Time,
-Damian