NEW YORK—Microsoft CEO Satya Nadella unveiled a transformative moment for enterprise AI on January 28, 2026, as the tech giant reported unprecedented Copilot adoption and cloud growth that signals AI is no longer experimental but mainstream.
During the fiscal 2026 second-quarter earnings call, the company revealed 15 million paid Microsoft 365 Copilot seats and $51.5 billion in cloud revenue, marking the first time cloud revenue surpassed the $50 billion milestone.
This represents a pivotal shift in how enterprises globally are embedding AI into everyday work, with Nadella positioning Microsoft as the undisputed leader in the artificial intelligence revolution.
Key Facts
• Microsoft 365 Copilot seats jumped 160 percent year-over-year to reach 15 million paid seats, with daily active users surging 10 times over the same period, signaling rapid enterprise adoption.
• Cloud revenue reached $51.5 billion, up 26 percent year-over-year, while Intelligent Cloud grew 29 percent to $32.9 billion, driven primarily by Azure AI services and infrastructure scaling.
• Microsoft invested $37.5 billion in capital expenditure during Q2, up 66 percent from the prior year, reflecting aggressive expansion of AI infrastructure and data center commitments across seven new countries.
Microsoft's earnings revealed a company undergoing a fundamental transformation from a traditional cloud provider to an AI-first hyperscaler. The 15 million Microsoft 365 Copilot seats represent a massive leap, particularly when considering that the company had previously been reluctant to disclose specific adoption numbers.
Daily active users increased 10 times year-over-year, and conversations per user doubled, indicating that organizations are moving beyond pilot projects into full-scale deployments across their enterprises.
GitHub Copilot, Microsoft's coding assistant, also demonstrated explosive growth with 4.7 million paid subscribers, up 75 percent year-over-year.
The number of customers paying more than one million dollars per quarter for Microsoft's Foundry platform grew nearly 80 percent year-over-year, with over 1,500 customers now using both Anthropic and OpenAI models through the platform. This diversification strategy ensures enterprises have flexibility in choosing AI models that best suit their specific use cases.
Nadella emphasized the breadth of Copilot's reach during the earnings call, highlighting deployments across productivity, coding, security, and healthcare. Security Copilot expanded with a dozen new and updated agents, while Purview audited 24 billion Copilot interactions in the quarter, up 9 times year-over-year.
Dragon Copilot, Microsoft's healthcare AI solution, is now used by over 100,000 medical providers and helped document 21 million patient encounters in Q2 alone, representing a 3 times increase from the previous period.
The infrastructure investments underscore Microsoft's commitment to supporting massive AI workloads. The company announced new data center commitments in seven countries as part of its sovereignty build, ensuring customers can deploy AI solutions within their own geographic regions for compliance and security reasons.
Microsoft's custom Cobalt 200 processor delivered more than 50 percent higher performance compared to its first-generation cloud-native processor, while fleet-level efficiency gains included a 50 percent throughput increase on OpenAI inference operations.
Commercial bookings nearly tripled, growing 230 percent, while the company's total backlog more than doubled to $625 billion. Notably, 45 percent of this backlog is attributable to OpenAI's multi-year Azure commitments, which has raised questions among some market watchers about OpenAI's path to profitability.
The broader market focus remains on Azure growth pacing and capital expenditure intensity, as investors seek clarity on the timeline for converting massive infrastructure investments into sustained margin expansion.
Revenue for the quarter reached $81. 3 billion, up 17 percent, with operating income growing 21 percent.
Net income was $38. 5 billion on a GAAP basis and $24.1 billion on a non-GAAP basis, excluding the $7. 6 billion gain from Microsoft's OpenAI investment revaluation.
Diluted earnings per share increased 24 percent on a non-GAAP basis to $4.14.
Nadella told analysts and investors during the earnings call, capturing the extraordinary pace of AI adoption across Microsoft's portfolio. This statement underscores the company's conviction that AI represents not just an incremental opportunity but a generational shift in computing and enterprise software.
The earnings report validates Microsoft's massive capital investment strategy and positions the company to capture an expanding share of enterprise AI budgets. With 15 million Copilot seats already deployed, 1 billion Windows 11 users, and expanding sovereign deployment options, Microsoft has constructed a competitive moat that extends across infrastructure, platforms, and intelligent applications.
The next critical milestone will be demonstrating sustained margin improvement as infrastructure efficiencies offset current capex intensity.
Do You Know?
Microsoft now has 1 billion Windows 11 users, up 45 percent year-over-year, driven largely by the October 2025 end-of-support deadline for Windows 10. This massive installed base provides a foundational platform for Copilot deployment across consumer and enterprise segments.
Key Terms
• Copilot: Microsoft's family of AI-powered assistants integrated across productivity tools, coding platforms, and business applications that help users automate tasks and enhance productivity.
• Azure: Microsoft's cloud computing platform offering infrastructure, platforms, and software services used by enterprises for deploying AI workloads and scalable applications.
• Backlog: The cumulative value of customer commitments and signed agreements for services to be delivered over future periods, indicating forward revenue visibility.
• Foundry: Microsoft's enterprise AI platform that enables customers to work with multiple AI models, including GPT-5.2 and Claude 4.5, with unified governance and security controls.
Image from Wikimedia Commons