Microsoft is ‘in the lead’ with new cloud-based A.I. workloads, CEO Nadella says
Microsoft CEO Satya Nadella speaks during a keynote address announcing ChatGPT integration for Bing at Microsoft in Redmond, Washington, Feb. 7, 2023.
Jason Redmond | AFP | Getty Images
Satya Nadella couldn’t help himself. He had something to brag about, and he did it on Microsoft’s painstakingly followed hourlong earnings call with analysts on Tuesday. Never mind that the stock was down about 4% after hours.
Nadella said that while Microsoft isn’t the largest provider of cloud infrastructure for other companies to use to run apps and websites (that would be Amazon, with an estimated 40% share compared to Microsoft’s 20.5%), the company is No. 1 when it comes to selling cloud-based AI services. That category is small but growing quickly after startup OpenAI’s ChatGPT chatbot, which is hosted on Azure, went viral at the end of 2022.
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A bigger artificial intelligence business might help Microsoft grow its position in cloud computing overall. On Tuesday, Microsoft said Azure and other cloud services increased by 26% year over year, faster than all other major product areas other than the Dynamics 365 cloud-based enterprise software.
Historically, Microsoft cares deeply about being dominant. For decades it has done that in PC operating systems with Windows and productivity software with Office. Since becoming CEO in 2014, Nadella has overseen a company that has continued to operate some laggards, including the Bing search engine, Surface PCs and Azure.
But in recent months Microsoft has been on a speed run to sell access to OpenAI’s underlying large language models in Azure to companies big and small, and some entrepreneurs have chosen to use them instead of models from Amazon, Google or startups.
Simultaneously, Microsoft is weaving the models into its own software, including Bing and Windows. Microsoft maintains a deep relationship with OpenAI after having invested billions into the startup.
What’s unclear is how much revenue Microsoft can accumulate from Azure AI services that depend on OpenAI’s technologies, and how much extra revenue that will bring in from companies using non-AI services in Azure. But Nadella sounded hopeful about Microsoft’s prospects in those areas.
“If you think about Azure, we have grown Azure over the years, coming from behind, and here we are as a strong No. 2 — in the lead when it comes to these new workloads,” he said. “So, for example, we are seeing new logos, customers who may have used another cloud for most of what they do are for the first time sort of starting to use Azure for some of their new AI workloads. We also have even customers who have used multiple clouds who used us for a class of sort of workloads also start new projects in data and AI, which they were using other clouds for.”
The concept of AI has been around longer than Microsoft, and Microsoft has been running AI models for other companies for several years. But ChatGPT and image-generation tools such as Adobe’s Firefly have kicked off fresh interest in generative AI, which involves taking a picture or other human input and creating new content with it.
Nadella told analysts to expect the company to win more market share and reduce the cost of acquiring customers.
“And so, yes, we celebrate,” he said.
That’s the reason Microsoft has disclosed how much of the expected Azure cloud growth will come from AI for the past two quarters, Nadella said.
Amy Hood, Microsoft’s finance chief, said on the call that in the fiscal first quarter, which will end on Sept. 30, Azure revenue should grow by 25% to 26% in constant currency, including 2 points from AI services. That could be worth hundreds of millions of dollars in new Azure AI revenue.
“There are two parts to even the AI,” Nadella said. “There is the models themselves, with our partnership with OpenAI. That’s sort of one type of spend on compute. And the other is much more revenue-driven, which is we will track the inference cost to the revenue and demand. And you’re already seeing both of those play out.”
WATCH: The question is how soon will we see A.I. hit Microsoft’s income statements: Adam Crisafulli
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TikTok CEO Shou Zi Chew told employees on Thursday that the company’s U.S. operations will be housed in a new joint venture.
The entity is named TikTok USDS Joint Venture LLC, according to a memo sent by Chew and obtained by CNBC. As part of the joint venture, Chew said the company has signed agreements with the three managing investors: Oracle, Silver Lake, and Abu Dhabi-based MGX. He said that the deal’s “closing date” is Jan. 22.
Under a national security law, which the Supreme Court upheld in January, China-based ByteDance was required to divest TikTok’s U.S. operations or face an effective ban in the country. In September, President Donald Trump signed an executive order approving a proposed deal that would keep TikTok operational in the U.S. by meeting the requirements of a law originally signed by former President Joe Biden.
Chew noted that the new TikTok joint venture would be “majority owned by American investors, governed by a new seven-member majority-American board of directors, and subject to terms that protect Americans’ data and U.S. national security.”
The U.S. joint venture will be 50% held by a consortium of new investors, including Oracle, Silver Lake and MGX with 15% each. Just over 30% will be held by affiliates of certain existing investors of ByteDance, and 19.9% will be retained by ByteDance, the memo said.
The TikTok chief said the entity will be responsible for protecting U.S. data, ensuring the security of its prized algorithm, content moderation and “software assurance.” He added that the joint venture will “have the exclusive right and authority to provide assurances that content, software, and data for American users is secure.”
In addition to being an investor, Oracle will serve as the “trusted security partner” in charge of auditing and validating that it complies with “agreed upon National Security Terms,” the memo said. Sensitive U.S. data will be stored in Oracle’s U.S.-based cloud computing data centers, Chew wrote.
The new TikTok entity will also be tasked with retraining the video app’s core content recommendation algorithm “on U.S. user data to ensure the content feed is free from outside manipulation,” the memo said.
Chew noted that TikTok global U.S. entities “will manage global product interoperability and certain commercial activities, including e-commerce, advertising, and marketing.”
Under Trump’s executive order in September, the attorney general was blocked from enforcing the national security law for a 120-day period in order to “permit the contemplated divestiture to be completed,” allowing the deal to finalize by Jan 23.
WATCH: TikTok signs deal for sale of U.S. unit to joint venture
The VC arms of Google and Nvidia have invested in Swedish vibe coding startup Lovable’s $330 million Series B at a $6.6 billion valuation, the company announced on Thursday.
The news confirms an earlier story from CNBC, which reported on Tuesday that Lovable had raised at that valuation, trebling its valuation from its previous round in July, and that the investors included U.S. VC firms Accel and Khosla Ventures.
CapitalG, one of Google’s VC divisions, and Menlo Ventures led the round. Alongside Accel and Khosla, Nvidia venture arm NVentures, actor Gwyneth Paltrow’s VC firm Kinship Ventures, Salesforce Ventures, Databricks Ventures, Atlassian Ventures, T.Capital, Hubspot Ventures, DST Global, EQT Global, Creandum and Evantic also participated.
The fresh funds take Lovable’s total raised in 2025 to over $500 million.
“Lovable has done something rare: built a product that enterprises and founders both love,” said Laela Sturdy, managing partner at CapitalG in a statement accompanying the announcement.
“The demand we’re seeing from Fortune 500 companies signals a fundamental shift in how software gets built.”
Lovable’s platform uses AI models from providers like OpenAI and Anthropic to help users build apps and websites using text prompts, without technical knowledge of coding.
The startup reported $200 million in annual recurring revenue (ARR) in November, just under a year after achieving $1 million in ARR for the first time. It was founded in 2023 by Anton Osika and Fabian Hedin.
Vibe coding startups have seen big interest from VCs in recent times, as investors bet on their promise of drastically reducing the time it takes to create software and apps.
In the U.S., Anysphere, which created coding tool Cursor, raised $2.3 billion at a $29.3 billion valuation in November. In September, Replit hit a $3 billion price tag after picking up $250 million and Vercel closed a $300 million round at a $9.3 billion valuation.
The Micron logo is seen displayed at the 8th China International Import Expo.
Sheldon Cooper | Lightrocket | Getty Images
Micron Technology‘s stock jumped 15% after the company signaled robust demand for its memory chips and blew away fiscal first-quarter estimates.
During an earnings call with analysts, Micron, which makes memory storage used for computers and artificial intelligence servers, said data center needs have fueled greater demand for its products.
Micron said it expects the total addressable market for high-bandwidth memory to hit $100 billion by 2028, growing at a 40% compounded annual growth rate. Management also upped its capital expenditures guidance to $20 billion from $18 billion.
“We are more than sold out,” said business chief Sumit Sadana. “We have a significant amount of unmet demand in our models and this is just consistent with an environment where the demand is substantially higher than supply for the foreseeable future.
Micron topped Wall Street estimates for the fiscal first quarter and issued blowout guidance.
The company reported adjusted earnings of $4.78 per share on $13.64 billion in revenue, surpassing LSEG estimates for earnings of $3.95 per share and $12.84 billion in sales.
Revenues in the current quarter are expected to hit about $18.70 billion, blowing past the $14.20 billion expected by LSEG. Adjusted earnings are forecast to reach $8.42, versus expectations of $4.78 per share.
JPMorgan upped its price target on the stock following the results, citing the favorable pricing setup, while Bank of America upgraded shares to a buy rating.
Morgan Stanley called the results the best revenue and net income upside in the “history of the U.S. semis industry” outside of Nvidia.
“If AI keeps growing as we expect, we believe that the next 12 months are going to have broader coat tails to the AI trade than just the processor names and memory would be the biggest beneficiary,” analysts wrote.
WATCH: Micron shares spike on better-than-expected quarterly results
Micron year-to-date stock chart.
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