As artificial intelligence shifts computing from static software to intelligent assistants that work continuously on a user’s behalf, Microsoft Corp. (NASDAQ:MSFT) says the next phase of its AI business will be driven not just by software subscriptions but by how much customers actually use its AI tools.

Usage-Based Pricing Broadens AI Monetization

During its fourth-quarter earnings call, CEO Satya Nadella said Microsoft is evolving its commercial model beyond per seat to per seat plus consumption.

“We are also evolving our business model beyond per seat to per seat plus consumption, further expanding our TAM and delivering more customer value,” Nadella told analysts.

Finance chief Amy Hood echoed that view, saying Microsoft’s expanding AI opportunity is increasingly tied to “usage and consumption growth” as more AI experiences become integrated across enterprise workflows.

Nadella added that the company recently added usage-based billing to Microsoft 365 Copilot, with thousands of customers already paying for and actively using the feature, while GitHub Copilot was also seeing meaningful revenue from its newly launched usage-based billing model.

More AI Usage Starts With Making Copilot Indispensable

Microsoft is positioning Copilot as the centerpiece of its AI strategy.

Nadella said Chat, CoWork, Autopilot, and Code are coming together in what he called Microsoft’s “flagship super app” for different user roles.

As Copilot becomes embedded in more daily workflows, the company stands to benefit not only from software subscriptions but also from higher AI consumption across its products.

Microsoft continues to ramp up AI infrastructure spending to meet demand that the company says still exceeds available computing capacity.

Earnings Top Estimates As Azure Growth Accelerates

The company reported fourth-quarter revenue of $90.01 billion, up 18% year-over-year and ahead of the Street consensus estimate of $87.62 billion, according to Benzinga Pro. Earnings came in at $4.74 per share, topping analyst estimates of $4.24.

Overall cloud revenue rose 27% year-over-year to $59.3 billion, while Azure and other cloud services revenue climbed 43% from a year earlier.

Price Action: The stock closed 0.71% lower at $390.54 on Wednesday and jumped 8.88% to $425.21 in after-hours trading following the earnings release.

Benzinga edge rankings indicate MSFT has a Momentum score in the 10th percentile and a Growth score in the 56th percentile.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.