Deepsek and the Drive to Greater Artificial Intelligence (AI) Efficiency was the subtext underlying underlying microsoft's latest Quarterly filing. The company's Cloud Business Reported Revenue of $ 69.6bn for the Quarter that Ended 31 December 2024.
Microsoft Ceo Satya Nadella Said Microsoft Cloud Surpassed $ 40BN in Revenue for the first time, up 21% year -over-yaar. “Enterprises are beGinning to move from proof-of-concepts to enterprise-with deployments to unlock the full roi [return on investment] of AI, “He said. “And our ai business has now surpassed an annual revenue rate of $ 13bn, up 175% year-over-yaar.”
DURING The Earnings Call, Nadella Acknowledded That Challenge for Hyperscalers is the need to ensure they have a fleet of the most modern ai-optimized hardware balance s that do not need the latest hardware.
“You don't want to buy too much of anyting at one time,” He said. “Because of moore's law, every year is going to give you 2x [performance improvement]Your [software] Optimization is going to give you 10x. You want to continuet upgrade the fleet, modernise the fleet, age the fleet, and at the end of the day, have the right ratio of modernisation and demand-driven monetisation. “
For now, Microsoft is having to buy expensive ai acceleration hardware, which is impacting its margins. Chief Financial Officer Amy Hood Said that Microsoft Cloud Margins are down year -over-yaar drive by “The impact of scaling our infrastructure”. However, she noted that this scaling is not necessarily enabling it to grow its installed base significantly. For installation, Microsoft only expects “Moderate Growth” in the Annual Rate of its E5 and M365 Copilot subscriptions, due to the size of the existing installed base.
When asked about the impact of deepsek, which is seen as a Rival to us ai dominanceNadella's view was that it “has some real innovations”. One of these is in terms of cost – both the cost of the hardware required to train and run infererance work and the cost to use it, which is measured in tokens.
Responding to a question on where Microsoft is Taking a Backseat in OPENAI Funding Due to the Recent Stargate projectHe said: “One of the key things to note in ai is you don't just launch the frontier model. If it's too experiencesive to serve, it's no good. It won't generate any demand. You've got to have that optimization so that incentive costs come down and they [the model] can be consumed broadly. “
This equates to a lower price per token, which makes the ai model more affordable to use. With more Efficient Large Language Models Like Deepsek, The Hardware required to run the model is also also significantly lower.
“When token prises fall, infererance computing pris Fall; That means people can consume more, “said nadella. “And there will be more apps written. It's unimaginable to think that here we are in the beginning of '25, where on the pc, you can run a model that [previously] required pretty massive cloud infrastructure. “
He said deepsek demonstrated that ai will be much more ubiquitous, and represented an options for the microsoft business. “For a hyperscaler like us, a pc platform provider like us, this is all good news as far as I'm concerned,” said nadella.
His prepared remarks also touched on the emergence of more efficient ai models, and althout See exponatily more demand. “