Microsoft Azure AI Users Base Rose by 50%, Half of Fortune 500 Adopt OpenAI Service
53,000 companies flock to Azure OpenAI Service
Microsoft’s Q2 2024 earnings announcement highlights the positive impact generative AI is having on the business. Overall, Microsoft’s revenue climbed 18% over Q2 2023. A meaningful portion of that growth was driven by a 30% rise in Azure cloud revenue, where generative AI is a key driver.
A key incentive behind Azure adoption is the cloud provider’s exclusive access to OpenAI’s popular large language models, GPT-3.5 and GPT-4. While organizations can go directly to OpenAI, an independent company cannot match a cloud hyperscaler’s scalability, reliability, security, and management features. Synthedia has heard directly from large companies that would only consider accessing OpenAI through Azure and one that started using the cloud service for the first time simply to get access to the OpenAI foundation models.
OpenAI Drives Fast Adoption
Satya Nadella, Microsoft’s CEO, said during the quarterly earnings call that “over half of the Fortune 500 use Azure OpenAI today.” He also said that Azure currently has over 53,000 Azure AI customers, with one-third added over the past 12 months (that means 50% growth). Key comments by Nadalla during the earnings call related to AI include:
Azure again took share this quarter, with our AI advantage.
Azure offers the top performance for AI training and inference and the most diverse selection of AI accelerators, including the latest from AMD and NVIDIA, as well as our own first party silicon, Azure Maia.
And, with Azure AI, we provide access to the best selection of foundation and open-source models, including both LLMs and SLMs, all integrated deeply with infrastructure, data, and tools on Azure.
We now have 53,000 Azure AI customers. Over one-third are new to Azure over the past 12 months.
Our new “models as a service” offering makes it easy for developers to use LLMs from our partners like Cohere, Meta, and Mistral on Azure without having to manage underlying infrastructure.
We’ve also built the world’s most popular SLMs, which offer performance comparable to larger models but are small enough to run on a laptop or mobile device. Anker, Ashley, AT&T, EY, and Thomson Reuters, for example, are all already exploring how to use our SLM Phi for their applications.
And we have great momentum with our Azure OpenAI Service. This quarter, we added support for OpenAI’s latest models, including GPT-4 Turbo, GPT-4 with Vision, Dall-E 3, as well as fine-tuning.
We are seeing increased usage from AI-first startups like Moveworks, Perplexity, SymphonyAI, as well as some of the world’s largest companies. Over half of the Fortune 500 use Azure OpenAI today, including Ally Financial, Coca-Cola, and Rockwell Automation.
For example, at CES this month Walmart shared how it’s using Azure OpenAI Service, along with its own proprietary data and models, to streamline how more than 50,000 associates work, and transform how its millions of customers shop.
Generative AI Halo Strategy
Microsoft’s generative AI strategy is showing early promise that may become sustained benefits. The $10 billion investment in OpenAI and, heretofore, exclusive model access among cloud providers is sufficient motivation for a large number of businesses to sign up for Azure services. Once under the Azure tent, those companies then have easy access to other cloud services.
Those additional services include Microsoft’s own generative AI models, such as the small language model called Phi. That model represents an opportunity for Microsoft to provide customer value while keeping more of the margin. Azure users can also sample foundation models from other providers, such as Llama 2 from Meta.
All of the generative AI attention flowing through Azure and its partnership with OpenAI also provides the company with a “halo effect” related to new Copilot features within existing enterprise software, such as 365 and Dynamics. And it offers the company a lot of usage data that can help it better understand the market.
Microsoft’s revenue rise from generative AI is not as large as NVIDIA's, but it suggests that Azure's growth is benefitting significantly from the rapid large language model (LLM) adoption. Revenue growth from this group is likely to accelerate throughout 2024.
