Microsoft Copilot sales hit audacious goals after pivoting AI sales strategy on Wall Street input

Microsoft Hit 'Audacious' Copilot Goals After Wall Street Input

Microsoft Corp., responding to Wall Street feedback, has pivoted its AI sales strategy to focus on selling Copilot rather than offering it for free as part of a software bundle. Company leadership set and essentially hit "some pretty big audacious goals" for selling Copilot in the quarter that ended in March, said Judson Althoff, chief executive officer of Microsoft's commercial business, during an internal meeting Thursday, according to people familiar with the remarks. The world's largest software maker said in January that only about 3% of its customers were paying for Copilot, its flagship artificial intelligence tool for the workplace. The revelation didn't go over well with some investors, who had hoped more customers would pay for the assistant. Microsoft's stock popped after Bloomberg's report on Thursday. The shares were up about 1% at 3:41 p.m. in New York. The stock had dropped 24% this year through Wednesday's close, far worse than the S&P 500 Index. Through the end of last year, Microsoft was focused on driving free adoption of Copilot for existing office software customers in addition to selling it. Now, in response to analysts' feedback, the company has zeroed in on persuading corporate customers to pay up, Althoff said in the internal meeting. Microsoft declined to comment. The company's fiscal quarter ended earlier this week. Microsoft has set bold goals for paid Copilot subscriptions in the current quarter that will be "materially ahead" of the figure reported in January, Althoff said. The executive was responding to a question from an employee about how Microsoft is monetizing its AI tools. Several questions focused on AI strategy and how the company is navigating competition from OpenAI and other rivals. "We're in a dog fight right now each and every day at the face of every single customer," Althoff said. Microsoft's pitch is based on working with all of the best AI models in a secure way, he said. Last month, Microsoft unveiled a new bundle of workplace software with the aim of getting more people to use its AI tools for the office. Its workplace AI tool costs about $30 per user per month, and the new bundle will cost about $99 per user per month. Microsoft had about 450 million users of its office software, it said in January.

Microsoft executive touts Copilot sales traction as AI anxiety weighs on stock

Microsoft has made greater inroads with sales of its Copilot artificial intelligence add-on for business clients after facing criticism for relatively low adoption in recent months, executive Judson Althoff told employees on Thursday. Software stocks including Microsoft have come down this year on fears that generative AI models could heighten competition. Microsoft, whose stock sunk 23% in the first quarter, has ramped up spending on data centers for cloud customers such as OpenAI, and investors are seeking signs that products enhanced with AI models will boost revenue and profitability. In January, Microsoft said it had racked up 15 million seats for the Microsoft 365 Copilot that sits atop commercial productivity software subscriptions, representing 3% of seats for the standard bundles. Microsoft 365 corporate users have access to a Copilot Chat assistant with limited features. CEO Satya Nadella told analysts on an earnings call that the company had "multiples more enterprise chat users." The $30-per-month Microsoft 365 Copilot became widely available in 2023, and since then, many analysts have described adoption as nascent. After the January disclosure, analysts at UBS, who recommend buying Microsoft shares, said they had expected more subscribers. Sellers had been trying to land paid Microsoft 365 Copilot seats and get everyone else using Copilot Chat, but Microsoft revamped its strategy after receiving feedback from analysts on the results, Althoff, CEO of the company's commercial business, said in a town hall meeting, according to a transcript that CNBC reviewed. Microsoft did not immediately have a comment. Bloomberg reported earlier on the remarks. Althoff said he and Amy Hood, Microsoft's finance chief, issued bold goals for the March quarter, which ended on Tuesday. "Those were hit for Q3," Althoff said. The company has set fresh ambitious targets for the June quarter. "I actually feel very confident in those numbers," he said.