Despite the company’s enthusiastic reports on the adoption of its generative AI offerings, one market analyst has characterized the most recent usage figures as a ‘disappointing uptake.’
Microsoft recently released its first adoption statistics for Microsoft 365 Copilot, announcing this week that it has secured 15 million paid user subscriptions. During Wednesday’s earnings call, Microsoft CEO Satya Nadella noted “multiples more enterprise chat users” — referring to Copilot Chat, a scaled-down version of the AI assistant that Microsoft 365 subscribers can access without additional charges. (Specific figures for these users were not disclosed by Microsoft.)
According to analysts, the reported number of paid user licenses falls short of expectations at this juncture, especially considering the extensive marketing efforts and strategic positioning of Microsoft 365 Copilot as a core component of its AI strategy.
“Microsoft’s revelation of 15 million paid users for Microsoft 365 Copilot signals a sluggish acceptance of the tool – accounting for merely 3.3% of the 450 million-strong Microsoft 365 customer base, despite the extensive restructuring of the Microsoft 365 product and its market approach around Copilot,” stated J.P. Gownder, a vice president and principal analyst at Forrester.
“My assessment is that businesses are still attempting to determine the optimal integration of Microsoft 365 Copilot, and they are reluctant to incur another cost without clear evidence of its impact on employee output,” remarked Jack Gold, principal analyst at J. Gold Associates.
He foresees a substantial increase in adoption over the next few years, although this will likely be contingent on “contractual renewals and existing enterprise obligations, rather than simply appending to current Microsoft agreements. This mirrors how companies initially approached the transition to Microsoft 365,” Gold elaborated.
Launched in late 2023, Microsoft 365 Copilot is an optional paid add-on for Microsoft 365 subscribers. It’s integrated within productivity applications like Word, Teams, and Outlook, and is increasingly presented as an AI agent capable of autonomous task execution.
Despite significant corporate interest in Microsoft 365 Copilot and its potential to enhance workforce efficiency, its implementation has been slow. This can be attributed to several factors, including a perceived lack of clear value and apprehensions regarding data security and governance.
During its earnings report, Microsoft revealed a three-fold increase in customers holding over 35,000 licenses compared to the previous year. (The exact total was not disclosed.) This growth included new agreements with entities such as Fiserv, ING, NAST, the University of Kentucky, the University of Manchester, the US Department of Interior, and Westpac. “Publicis alone procured more than 95,000 licenses for nearly all its workforce,” Nadella stated.
In many instances, companies opt to purchase a limited number of Microsoft 365 licenses, allocating them to smaller teams within their organization “due to the expense and the absence of a proven, quantifiable return on investment,” Gownder explained.
“Therefore, while many organizations possess a few licenses, only a select few organizations hold a substantial number of licenses,” he elaborated.
Microsoft also shared data concerning individual usage. Nadella announced on the earnings call that Microsoft 365 Copilot is becoming a “daily routine” for users who have access to the AI assistant, noting a tenfold rise in daily active users compared to the prior year. Additionally, the average number of user interactions with the AI assistant has doubled over the past year. In both instances, Microsoft did not provide precise figures.
Forrester’s Gownder noted that in the medium term, Microsoft is recalibrating the value proposition of the paid Microsoft 365 Copilot offering. While primarily seen as an AI personal assistant within Office applications, it also offers license holders a “powerful promise of cost management in an increasingly agentic AI landscape,” he observed.
This is because Microsoft 365 Copilot license holders receive unrestricted access to Copilot Agents. “As companies deploy an increasing number of Copilot Agents, the license’s value proposition will expand to encompass unmetered access to these agents,” he explained.
The company must still demonstrate the utility of these tools to both businesses and individual users. “Unless Microsoft can enhance the Microsoft 365 Copilot product, both as a personal assistant and as a facilitator of agentic AI, it may continue to face challenges with adoption,” Gownder cautioned.
During the earnings call, Microsoft highlighted a 17% increase in revenue for its Microsoft 365 productivity suite. The total number of paid subscriptions rose by 6% year-over-year to 450 million, driven by heightened adoption among small and medium-sized enterprises.
Microsoft recently announced upcoming price adjustments for Microsoft 365 customers, effective July 1.
