Microsoft’s cloud commercial business drove earnings during its fiscal third quarter with the news that OpenAI’s technology is being deployed across Microsoft’s Azure products. 

WHY IT MATTERS: The $380 billion company posted a 22% year-over-year increase in cloud revenues to $28.5 billion as Microsoft invested in the use of generative AI within its cloud offerings, including the launch of Azure OpenAI service, Chief Executive Satya Nadella said during today’s earnings call.

“Our Azure OpenAI Service brings together advanced models, including ChatGPT and GPT-4 with the enterprise capabilities of Azure,” he said. 

The Azure OpenAI service allows platform users to “fine-tune the model’s hyperparameters to increase accuracy of outputs,” enabling users a greater level of control over workloads using OpenAI’s GPT-4 engine, according to Microsoft’s website. 

In addition, Dutch financial institutions ING Bank and Rabobank are among the bank clients utilizing hybrid and multi-cloud management platform Azure Arc to assist in running services across on-premises, edge and multi-cloud environments, Nadella added. 

THE BIGGER PICTURE: Microsoft first invested in OpenAI with a pair of $1 billion funding rounds in 2019 and 2021, followed by a $10 billion investment into the fintech in January.  

The tech giant has since integrated OpenAI’s generative AI technology within its products. Azure is the first platform for commercial use to receive the upgraded capabilities from OpenAI, according to Microsoft. 

BY THE NUMBERS: Microsoft posted for Q3: 

• Revenue increased 7% YoY to $52.9 billion; 
• Operating expenses increased 7% YoY to $14.4 billion; and 
• Intelligent cloud revenue increased 16% YoY to $22.1 billion. 

NOTEWORTHY: Microsoft partnered with $1.8 trillion Banco Santander this month to launch the Santander X Global Challenge to fintech startups, according to Santander’s website. The challenge provides companies access to OpenAI’s technology to build AI-based products or services to help solve problems and complete tasks more effectively, according to the bank’s website. 

The chosen winners will get the opportunity to pitch their AI creations to Microsoft’s venture capital arm, M12, and to Santander for use within the bank’s processes, Diego Calascibetta, global head of entrepreneurship at Santander Universidades, told Bank Automation News. 

“We decided to join forces with Microsoft to support and promote the growth of the AI ecosystem, providing a platform for startups and scaleups to showcase their innovative AI solutions and connect with industry experts, investors and world-class resources,” he said. 

The tech giant’s goal is to democratize AI for wide use across several different industries, Jens Hansen, general manager EMEA of Data and AI at Microsoft, told BAN. 

“This challenge tries to encourage the applicant teams to develop AI-powered products and services of all kinds,” he said. “Microsoft’s AI tools and technologies, powered by Azure, are designed to benefit everyone at every level in every organization.” 

FLASHBACK: In January, Microsoft announced it would cut 10,000 employees by the end of 2023. However, the company actually reported a 9% YoY increase in head count during the earnings call. 

FUTURE LOOK: The company intends to continue investing and improving its AI capabilities within its Azure environments as clients look to Microsoft for workflow tools, Chief Financial Officer Amy Hood said during the call. 

“Some of the new business process automation work that’s going to get done. … Will benefit from having the AI services available on Azure,” she added.  

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