For the first time ever, Microsoft (MSFT 0.38%) revealed key metrics for its Copilot artificial intelligence (AI) chatbot and assistant, a critical piece of the large conglomerate's AI strategy and somewhat viewed as a competitor to other chatbots like OpenAI's ChatGPT. Investors have long tried to understand how well Copilot is resonating among customers and whether it can truly be one of the main AI chatbots. Metrics revealed about Copilot were shocking in more ways than one.
What is Copilot?
As described on Microsoft's website, "Copilot is a conversational, AI-powered assistant that helps boost productivity and streamline workflows by offering contextual assistance, automating routine tasks, and analyzing data." Examples of tasks that Copilot can execute include drafting presentations and reports by generating content and suggesting edits and revisions, analyzing data and creating charts, and summarizing email chains and drafting emails.
Image source: Getty Images.
Different Microsoft Copilot plans include different Copilot assistants and capabilities. The free Copilot version gives users access to Microsoft's AI chatbot and the capability to generate AI-powered images. Microsoft 365 Personal provides users with higher usage limits on AI features across Microsoft 365's suite of office products and on the Copilot app, advanced security and up to 1 terabyte of cloud storage for files and photos.
Microsoft 365 Premium plan offers higher limits and more app usage than Microsoft 365 Personal. Copilot Studio enables users to build, test, and publish agents, while granting access to generative AI plugins to enhance these agents.
Paying Copilot users and growth
On Microsoft's most recent earnings call, management said Microsoft 365 Copilot has 15 million paid Copilot seats, up 160% year over year. Businesses can pay $30 per user per month for Microsoft 365 Copilot.
Furthermore, Copilot seems to be resonating deeply with some businesses, as several of Microsoft's customers now have over 35,000 seats using Copilot, including Fiserv, ING, University of Kentucky, University of Manchester, and the U.S. Department of the Interior.
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Key Data Points
Management also said Copilot has seen the average number of conversations per user double year over year and daily active users increase by tenfold. Copilot also has a checkout feature in which Microsoft has partnered with payment and e-commerce sites like Paypal, Shopify, and Stripe, so users can make purchases directly from Copilot. Finally, Microsoft's GitHub Copilot, which is for developers, had 4.7 million paid subscribers, up 75% year over year.
Investors are looking for more
While growth may be strong, Copilot adoption is still low among Microsoft's total user base. The 15 million paid Microsoft 365 Copilot users only represent about 3.3% of the company's total 450 million 365 subscribers. The 4.7 million GitHub Copilot paid subscribers only represent about 3.1% of GitHub's total 150 million registered developers.
Now, it's of course possible that adoption will simply take more time. However, Microsoft has already invested hundreds of billions in AI-related infrastructure and services, and it doesn't seem close to being a real competitor to some of the bigger chatbots, like OpenAI's ChatGPT, yet.
"M365 revs growth is not accelerating due to Copilot, many checks on Copilot don't suggest a strong usage ramp (we plan to refresh our own checks in case we've missed a usage ramp) and the model market appears crowded and capital-intensive," UBS analyst Karl Keirstead wrote in a research note following Microsoft's latest earnings report. "We think Microsoft needs to 'prove' that these are good investments."
The market clearly wants more. If you think about the average person, how many of them know about ChatGPT, and how many of them know about Copilot? There is clearly much work to be done to improve Copilot adoption. I still think Microsoft is likely to be one of the main beneficiaries of AI adoption, particularly in its Azure and cloud services business, but Copilot leaves much to be desired right now.
