Microsoft's AI coding tool GitHub Copilot is already a bigger business than GitHub was at acquisition

Microsoft has shared new data on its GitHub Copilot and Microsoft 365 Copilot AI products. According to the company, GitHub Copilot has grown larger than GitHub was when Microsoft acquired it. Azure infrastructure is struggling to keep up with AI demand.

CEO Satya Nadella said GitHub Copilot, Microsoft's AI-powered developer tool, is the most widely used in its category. The tool now accounts for more than 40 percent of GitHub's revenue growth this year. More than 77,000 organizations are currently using the tool, a 180 percent increase from last year.

"[Github Copilot] is already a larger business than all of GitHub was when we acquired it," Nadella stated. Microsoft bought GitHub in 2018 for $7.5 billion in stock.

Nadella also noted that Microsoft 365 Copilot is becoming "a daily habit for knowledge workers, as it transforms work, workflow, and work artifacts." The number of daily users has nearly doubled from the previous quarter, while the customer base has grown by 60 percent.

In total, consumers have created well over 12 billion images and had 13 billion chats using Copilot, an increase of 150 percent since the beginning of the year. Microsoft has integrated Copilot into many of its services, including Bing or even Paint.

Microsoft is "constrained on AI capacity"

Chief Financial Officer Amy Hood explained that AI services accounted for eight percentage points of Azure's growth, with demand exceeding Microsoft's available capacity.

"We are, and we’ve talked about it now for quite a few quarters, we are constrained on AI capacity. And because of that, actually, we, to your point, have signed up with third parties to help us as we are behind with some leases on AI capacity," Hood said.

Microsoft added more than 60,000 Azure AI customers year over year, an increase of nearly 60 percent. Nadella noted that the average spend per customer continues to increase. In some European regions, growth in June fell short of Microsoft's expectations.

The stock market didn't like the numbers at first, with Microsoft shares down about seven percent in after-hours trading. The company's AI and Azure cloud growth of 30 percent barely met expectations. However, capital expenditures more than doubled from two years ago to nearly $19 billion, thanks in part to heavy spending on AI-enabled data centers and chips.

Overall, Microsoft reported revenue growth of 15 percent to $64.7 billion and profit growth of 10 percent to $22 billion in the most recent quarter.