Microsoft Commercial CFO talks Copilot pricing and holding early market advantages in AI

As Microsoft’s cloud solutions and services have grown in recent years, their performance has sometimes surprised those both inside and outside the company. For example, Azure’s growth has already far outpaced the company’s early expectations, said Microsoft Commercial EVP and CFO Dave O’Hara recently.

“In the early days of the cloud, we talked about, 'Hey, maybe this market could be $10 billion or $20 billion,' and it's obviously far exceeded that. I've given up trying to predict where it's going to go,” he told the audience at the J.P. Morgan Investor Global Technology, Media and Communications Conference earlier this week.

The predictions that the investor community most wants to hear today from Microsoft leaders today are related to AI and cloud, with Microsoft’s still nascent Copilot product plans squarely in focus. The possibilities are huge, O’Hara acknowledged, but when it comes to monetization of AI and Microsoft’s future financial performance, he advised that the company is taking a multi-pronged approach that will lead to uncertain near-term impact. He told the audience:

At a general level, there's really a few ways to think about it. One is [that] we have many of our products that are sold on a per-seat basis. And that works in some instances where you have certain functionality that people use all day, every day. Companies would prefer to pay for that as a per-seat.

There are other products maybe that are more consumption-driven. Data being an example where maybe a per-user construct makes more sense, but maybe a consumption model makes sense. And there are others where you might just have point AI services where people just go out and use it, pay as they go, and they use it for a while, disappear, come back a month later, they use it again. And so I think all of those are opportunities for us as a company. So per-user will see that show up in some places. Consumption will see it show up in others and others will just be services on demand.

O’Hara also sees AI market share as a competition among hyperscalers. It requires the right hardware availability, with vendors absorbing “incremental costs” that are “not cheap” and require the right monetization model.