For those who’re a big tech conglomerate, likelihood is you have most likely constructed your individual synthetic intelligence fashions that may energy AI chatbots and even agentic AI assistants that may automate or full duties usually achieved by people. Microsoft(NASDAQ: MSFT) definitely falls into this group, with its AI chatbot and assistant Copilot, which might perform a variety of capabilities.
On its current earnings name, Microsoft revealed that it had 15 million paying Copilot clients on the finish of its most up-to-date quarter, the primary time the corporate has disclosed this quantity. Whereas views on Copilot are considerably combined, I believe many traders and analysts left feeling disenchanted by the quantity, given Microsoft’s broader buyer base.
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Nevertheless, this is why it might be a blessing in disguise.
Picture supply: Getty Pictures.
Copilot serves many alternative capabilities. It has a chatbot that customers can immediate with queries, just like ChatGPT. Copilot may also be used as an assistant inside Microsoft 365’s suite of workplace instruments, and customers may construct agentic AI assistants with out coding data that may automate duties and handle workflows.
The corporate has totally different pricing for varied plans. As an illustration, enterprise pricing fees $30 per person monthly. Microsoft 365 subscribers get primary Copilot chat totally free, however extra companies, akin to extra instruments and better utilization limits, value additional. Whereas Microsoft grew paid Copilot customers by 160% yr over yr, 15 million paying clients nonetheless would not look like lots when you think about that Microsoft 365 has over 450 million paid industrial seats.
But it surely’s essential to keep in mind that changing free customers to paid customers isn’t simple. As an illustration, as of July 2025, ChatGPT reportedly had solely 35 million paid plus or professional subscriptions, which value $20 and $200 monthly, respectively. On the time, that was a few 5% hit charge. With 15 million Copilot members, that is a few 3.3% hit charge amongst whole Microsoft 365 subscribers.
Now, I would argue ChatGPT’s development is way more spectacular, provided that it did not have an present person base to faucet into. In idea, Microsoft ought to be capable to cross-sell to its present person base, though ChatGPT additionally had the first-mover benefit and has arguably had extra publicity than anybody.
There was some concern amongst Wall Avenue analysts, together with these at UBS, who famous that Microsoft 365 has not seen income development speed up from Copilot, and likewise that their analysis has not seen an enormous “utilization ramp.”
The silver lining is that the comparatively small variety of paid Copilot customers leaves loads of room for Microsoft to continue to grow Copilot and shock to the upside in future quarters, producing income development.
As an illustration, if Microsoft grew paid Copilot customers by 160% once more over the following yr — and it is not clear that they will do that — that will translate into an extra $8.6 billion in income, assuming $30 per person monthly, or $360 per yr per person. That is equal to almost 3% of Microsoft’s projected $328 billion in income for its fiscal yr 2026.
Whereas traders are rightfully targeted on Copilot’s development, I do not suppose it needs to be a rival to ChatGPT, since Microsoft already has many robust companies that supply worth to clients. Microsoft additionally has important fairness stakes in each OpenAI and Anthropic, so it advantages if these main AI gamers succeed. Whereas the corporate cannot sit idle with regards to AI, AI may also be positioned as a value-add throughout the firm, relatively than as the primary product.
For instance, Copilot must hold Microsoft 365 aggressive amongst future rival workplace suite merchandise. If the corporate can leverage AI to take care of its dominance on this house, the corporate will seemingly be capable to stave off competitors and continue to grow its 365 subscriber base. AI adoption can also be nonetheless seemingly within the early innings, and customers could merely not be able to undertake and combine a few of the instruments Copilot presents simply but. If and when this modifications, Microsoft will likely be prepared.
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Bram Berkowitz has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Microsoft. The Motley Idiot has a disclosure coverage.
