Satya Nadella says Microsoft's AI model performance is "doubling every 6 months", despite the estranged OpenAI partnership

Microsoft recently shared its latest earnings report for FY25 Q3, citing a 13% increase year-over-year, mainly due to its cloud, gaming, and AI services.

Over the past few months, investors and key stakeholders in the AI landscape have raised concerns about the tech giant's exorbitant spending on AI, stating that it's difficult to establish a clear profitability path in the seemingly volatile field.

At the beginning of the year, OpenAI unveiled its $500 billion Stargate project designed to facilitate the construction of data centers across the United States. The move raised questions about the future of Microsoft's multi-billion-dollar partnership with OpenAI. Even Salesforce CEO Marc Benioff predicted that Microsoft won't use OpenAI's technology in the future.

While Microsoft lost its exclusive cloud provider status for OpenAI, it retains the “right of first refusal,” making it the first option to host OpenAI workloads in its cloud infrastructure and services. The services will only be outsourced to other vendors if Microsoft can't meet the requirements.

However, OpenAI's mega Stargate deal didn't seem to faze Microsoft CEO Satya Nadella, who reiterated the company's plan to invest $80 billion in AI. And as it now seems, the commitment is paying off.

While sharing the company's impressive earnings report, the executive shed more light on its AI efforts and progress thus far. Interestingly, Nadella said the company's AI model performance is "doubling every six months" due to pre-training, inference, and system design (via Money Control).

According to Microsoft CEO Satya Nadella:

"Azure is the infrastructure layer for AI, optimized across every layer: DCs, silicon, systems software, and models to lower costs and increase performance.

We are delivering more performance per megawatt, lower cost per token, and faster dock-to-live times."

Last year, a damning report revealed Microsoft's troubles with its Copilot AI with insiders, including a senior executive referring to the tools as "gimmicky."

However, Nadella shares a different account, stating that Microsoft 365 Copilot is being used by hundreds of customers and is up 3X year-over-year. He added that customers have created over 1 million agents using SharePoint and Copilot Studio.