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Microsoft's AI Soars: $37B Run Rate Fueled by Copilot
31 May
Summary
- Microsoft's AI business has a $37 billion annualized revenue run rate, up 123% YoY.
- Microsoft 365 Copilot paid seats now exceed 20 million, a 250% increase.
- Commercial remaining performance obligations reached $627 billion, nearly doubling.
Microsoft's AI business is experiencing explosive growth, with an annualized revenue run rate of $37 billion, a 123% increase year-over-year as of May 31, 2026. This surge is driven by significant adoption of its AI tools, including Microsoft 365 Copilot, which now boasts over 20 million paid seats, up 250% annually. GitHub Copilot Enterprise is deployed in nearly 140,000 organizations, almost tripling from the previous year.
Despite these strong business fundamentals, Microsoft's stock has declined 13% year to date as of May 31, 2026. Investors appear to be undervaluing the company's strategic AI platform shift and its substantial contracted revenue backlog. Commercial remaining performance obligations have reached $627 billion, nearly doubling year-over-year, providing a strong foundation for future earnings growth.
The Intelligent Cloud segment also saw impressive results, with revenue rising 30% to $34.68 billion, and Azure services growing by 40%. The company's operational efficiency is highlighted by its consistent EPS beats, healthy gross margins of 68.82%, and a return on equity of 33.28%.
