Microsoft shifts to usage-based pricing as AI agents drive $82.9 billion quarterly revenue

Microsoft Embraces Agentic AI as Core Business Strategy

Microsoft is undergoing a fundamental transformation in how it delivers and monetizes artificial intelligence, with CEO Satya Nadella declaring the company is "at the beginning of one of the most consequential platform shifts" during the company's latest earnings call 2

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. The Redmond-based tech giant reported $82.9 billion in revenue for the quarter ending March 31, representing an 18% increase from the previous year's third quarter 1

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. Net income climbed 23% to $31.8 billion, with the company's AI business alone surpassing a $37 billion annual revenue run rate and growing 123% year over year 4

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The results reflect Microsoft's aggressive bet on agentic computing, where AI agents become the dominant workload across the technology ecosystem. Nadella outlined the company's dual strategy: building the world's leading cloud and AI infrastructure while developing high-value agentic systems across productivity, coding, and security domains 3

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Usage-Based Pricing Model Transforms Revenue Structure

Microsoft is fundamentally changing its AI business model, moving beyond traditional per-seat licensing to a hybrid approach that combines user access with consumption-based charges. Nadella emphasized the company's "structural position in knowledge, work, coding [and] security" paired with "the right business model... which is user plus usage" 1

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. CFO Amy Hood explained that Microsoft's bookings measure is evolving to include both per-seat licenses and metered usage similar to the Azure cloud business, where customers "just bill for usage" 2

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This shift reflects how AI agents are creating measurable business value. Nadella described an outcome-based model where customers pay based on value created by AI agents working alongside users or autonomously, whether through decreased costs or increased revenue from compressed workflows 2

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. Nearly 60% of Microsoft customer service customers are already purchasing usage-based credits, while Copilot Credit consumption nearly doubled quarter-over-quarter as customers deploy custom agents tailored to their specific workflows 2

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GitHub Copilot Enterprise Subscribers Surge with New Pricing

Starting June 1, GitHub Copilot is transitioning to usage-based pricing to align costs with actual consumption 1

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. The developer platform, which Microsoft acquired in 2018, has seen GitHub Copilot enterprise subscribers nearly triple year-over-year, with nearly 140,000 organizations now using the AI coding assistant 1

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. Every GitHub Copilot plan will include a monthly allotment of GitHub AI Credits, with usage calculated based on token consumption, including input, output, and cached tokens 1

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The coding business represents Microsoft's most mature usage-based model at scale, with adoption doubling month over month 3

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. Nadella noted that Copilot has achieved the same level of weekly engagement as Microsoft's Outlook email application, signaling habitual usage patterns among customers 2

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Massive AI Infrastructure Investment Supports Growth

To support the surge in demand for AI and cloud services, Microsoft is scaling its infrastructure aggressively. Capital expenditures are expected to rise to over $40 billion to build additional capacity for AI tools, including massive data centers 1

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. The company spent $30.9 billion on infrastructure during the quarter and plans to add another gigawatt of capacity while aiming to double its data center footprint within two years 3

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Intelligent Cloud, anchored by Azure, grew 30% year-over-year to $34.7 billion, with Azure itself expanding 40% 4

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. The segment is evolving beyond a hosting environment to become the operating system for AI. Microsoft's commercial remaining performance obligation surged 99% to $627 billion, indicating deep enterprise commitment to the company's cloud and AI infrastructure stack 4

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Enterprise Adoption Accelerates Across Platforms

Nearly 90% of Fortune 500 companies now have active agents built with Microsoft's low-code/no-code tools 1

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. Microsoft Foundry, the unified Azure Platform-as-a-Service offering, is seeing strong traction with more than 300 customers expected to process over one trillion tokens this year 3

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. Microsoft Fabric, the company's unified data platform, is also gaining adoption with tens of thousands of customers using it to connect operational and analytical data for AI-driven insights 3

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The Productivity and Business Processes segment reached $35 billion in revenue, up 17%, with Microsoft 365 Commercial cloud revenue growing 19% and consumer cloud services revenue surging 33% 4

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. Microsoft is integrating AI across its ecosystem, from developer tools to AI-powered agents in Dynamics 365 and security platforms 3

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. Additionally, Microsoft Bing reached 1 billion active monthly users for the first time in the search service's 17-year history 1

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OpenAI Partnership Evolves Amid Competitive Landscape

Microsoft and OpenAI recently revised their partnership agreement, loosening ties to allow OpenAI greater freedom to work with Microsoft competitors, including Amazon, while placing a ceiling on revenue sharing through 2030 4

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. Nadella told analysts that the new deal reflects growth and evolution by both companies throughout the AI era, with different customer bases having different expectations regarding model diversity 2

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. He emphasized maintaining a "win-win construct" to preserve the partnership's strength 2

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Despite the strong financial results, Microsoft shares slipped around 2% in after-hours trading following the earnings announcement 4

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. The stock had experienced volatility earlier in 2026, tumbling nearly 25% amid investor concerns over elevated capital expenditures and potential cloud growth slowdowns, before rebounding about 21% since late March 4

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. The sustainability of triple-digit AI revenue growth and whether infrastructure investments will continue delivering proportional returns remain key questions for investors watching Microsoft's aggressive AI expansion.