Microsoft Was Early to AI. Nearly 4 Years Later, It’s Still Searching for a Breakout Hit

Microsoft Corp. (MSFT, Financials), the software and cloud computing company, is confronting a familiar challenge for CEO Satya Nadella: changing its business model before the technology market changes around it.

Microsoft moved early in generative AI through OpenAI, but the company has yet to produce a dominant AI model or application. Copilot adoption also remains modest relative to Microsoft’s enormous installed base.

The company has 30 million Copilot seats, while commercial Office 365 has more than 450 million users. Copilot currently costs an additional $30 per user each month.

AI agents are making that pricing model harder to sustain because complex tasks can consume dramatically different amounts of computing power.

Microsoft is responding with usage-based billing. Copilot Cowork, which handles larger productivity assignments, is an early example, with thousands of customers already paying based on consumption.

GitHub Copilot offers evidence the approach can work. Users reached…