Microsoft CEO Satya Nadella’s 2024 letter to shareholders, included in the tech giant’s annual report, outlined a pivotal year in the company’s journey, marked by record financial performance and transformative strides in AI. The letter arrives as Microsoft reaches its 50th anniversary and delves deep into the company’s core focus areas and its commitment to innovation in artificial intelligence.
Reflecting on Microsoft’s five decades in the technology sector, the chief executive zeroes in on the second year of what he describes as the AI platform shift, a period that has seen unprecedented growth in AI capabilities. He emphasizes that Microsoft has remained relevant by continually reinventing itself with every technological paradigm shift. “We moved from talking about AI to helping our customers translate it into real outcomes—one person, one organization, one institution, and one country at a time,” Nadella writes, underscoring Microsoft’s AI-powered advancements across multiple industries.
Nadella illustrates AI’s transformative impact with examples from various sectors, including retail, banking, healthcare, and education. In Australia, supermarket chain Coles generated 1.6 billion daily AI predictions to enhance customer experiences, while Unilever accelerated product development with AI simulations that drastically cut down the need for time-consuming lab experiments. In Brazil, Itaú, the country’s largest private bank, saw significant coding efficiency gains through Microsoft’s GitHub Copilot.
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These examples are a testament to Microsoft’s vision of AI not just as a technological feat, but as a tool driving real-world outcomes. Nadella also highlights Khan Academy, which is using Microsoft’s AI to provide accessible tutoring, and M-Kopa in Kenya, leveraging Azure Machine Learning to offer street vendors access to credit, demonstrating the platform’s broad societal impact.
Financial success: Record revenue
Microsoft’s financial performance in 2024 mirrored its aggressive push into AI and cloud technologies. The company reported over $245 billion in annual revenue, marking a 16% increase year-over-year, alongside a 24% jump in operating income to over $109 billion. These results highlight Microsoft’s success in translating its AI innovations into financial gains, with customers across the globe embracing AI to drive business efficiencies.
Nadella attributes this strong financial performance to three strategic priorities: advancing security through initiatives like the Secure Future Initiative (SFI), expanding AI innovation across Microsoft’s product portfolio, and managing costs dynamically to generate durable, long-term growth. “We are focused on continuous improvement across everything we do,” Nadella stresses, adding that operational excellence will continue to drive future success.
AI revolution
In the letter, Nadella delves into the technical drivers behind Microsoft’s AI advances. The scaling laws of deep neural networks (DNNs), Nadella explains, are pushing AI performance to new heights at an unprecedented rate, doubling progress approximately every six months, compared to Moore’s Law’s two-year cycle. These advancements are ushering in new capabilities, including multimodal natural user interfaces that support speech, images, and videos, memory that retains context across apps and devices, and advanced reasoning tools that allow AI to plan and execute tasks.
Nadella describes this “agentic era” of AI, where a rich ecosystem of AI agents can take action on behalf of users in a variety of contexts, including personal life, business processes, and cross-organizational tasks. According to Nadella, these AI agents have the potential to revolutionize industries by boosting productivity and efficiency across the board.
Key platforms
At the heart of Microsoft’s AI push is Copilot, which Nadella describes as the “new UI for AI.” The Copilot ecosystem spans Microsoft 365, GitHub, and other productivity tools, empowering users to automate complex tasks and make better decisions using AI. Nadella shares that Microsoft 365 Copilot is now being used by employees at nearly 60% of the Fortune 500 companies and has become a “daily habit” for many knowledge workers. Studies show that early adopters of Microsoft 365 Copilot reported as much as a 70% improvement in productivity.
The broader Copilot stack includes infrastructure, data, and app services, enabling customers to create their own copilots tailored to specific business processes. The company also introduced a new category of Copilot+ devices, which are purpose-built for AI-driven workloads, signaling Microsoft’s ambition to create a hardware ecosystem optimized for the AI era.
Microsoft’s cloud platform, Azure, continues to be a cornerstone of the company’s growth. Nadella highlights expansions in cloud and AI capacity across five continents, positioning Microsoft as a leader in the global cloud infrastructure market. The company has also broadened its AI accelerator offerings with new hardware partnerships, including NVIDIA and AMD, alongside its proprietary Azure Maia silicon.
Azure AI is now used by over 60,000 customers, and strategic partnerships, such as with OpenAI, have further cemented Microsoft’s leadership in AI development. Nadella points to the rise of Phi-3, a small language model designed to meet specific customer needs, and the company’s collaboration with G42 in the UAE to enhance AI applications in the region.
Looking ahead
Nadella concludes his letter by reflecting on the broader mission of Microsoft in this new AI-driven world. He emphasizes that trust remains a cornerstone of Microsoft’s strategy, especially in AI innovation. “AI must be trustworthy,” he declares, noting that Microsoft’s Responsible AI practices are designed to ensure that AI is secure, private, and safe.
The company is also focused on democratizing access to AI, providing tools and resources to nonprofits, governments, and underserved communities. Microsoft’s initiatives have already trained over 14 million people in digital skills, with a focus on marginalized communities.
Nadella also reiterates Microsoft’s environmental goals, stressing the need to ensure the sustainability of AI technologies. He describes Microsoft’s progress toward becoming carbon negative by 2030, as well as efforts to address water scarcity and waste reduction.
In closing, Nadella touches on a personal story that illustrates the global reach of AI innovation: the case of an Indian farmer who used a voice-based app, powered by Microsoft’s GPT model, to apply for government subsidies. “AI is putting expertise at our fingertips,” Nadella concludes, expressing his belief that the democratization of AI will empower people globally and transform industries across sectors.
Nadella’s vision for Microsoft’s future is clear: by continuing to lead in AI, cloud innovation, and operational excellence, the company is poised to shape the next era of technological progress, one innovation at a time.