Artificial intelligence (AI) may soon move beyond chatbots into a new era of agentic AI, where autonomous software agents plan, reason, and execute complex tasks on behalf of other users. MarketsandMarkets estimates that the global AI agents market could grow from about $5.2 billion in 2024 to $52.6 billion in 2030, implying close to tenfold expansion this decade.
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While all major companies are racing to deploy these agents across use cases in customer service, software development, and business operations, Microsoft (MSFT 0.20%) already appears to be ahead of the pack. Here's why.
Infrastructure powering AI agents
In its second-quarter fiscal 2026 earnings call, CEO Satya Nadella described Microsoft's AI strategy as resting on three layers: the cloud infrastructure that powers the AI models, the platform used to build AI agents, and the high-value applications where those agents are deployed. Hence, Microsoft is working to control every aspect of building and running AI agents.
NASDAQ: MSFT
Key Data Points
The foundation of this strategy is Microsoft's massive cloud infrastructure. In the second quarter, Microsoft Cloud segment revenues increased 26% year over year to $51.5 billion, while Azure and other cloud services (a part of Microsoft Cloud) grew 39% year over year. This infrastructure provides Microsoft with the computing power needed to train AI models and run large numbers of AI agents at scale.
Microsoft is optimizing its cloud infrastructure to process more AI tasks using less computing power and energy. These efficiency improvements are important, as agentic AI can involve generating massive volumes of AI queries that require significant processing power.
Platforms and applications for AI agents
Beyond infrastructure, Microsoft has built platforms such as Azure AI Foundry, a service that helps enterprises build and deploy AI applications, and Microsoft Fabric, a unified data platform that organizes and analyses enterprise data. Through these platforms, companies can choose between multiple AI models, connect models to enterprise data, orchestrate external tools and workflows, and build, customize, and deploy AI applications and agents.
Microsoft is witnessing robust adoption of these services. Fabric reached an annual revenue run rate of over $2 billion with over 31,000 customers, while the number of customers spending over $1 million quarterly on Foundry grew nearly 80% year over year at the end of the second quarter.
Microsoft is also using agentic capabilities in high-value applications used by millions of workers and developers. Products such as Microsoft 365 Copilot and GitHub Copilot allow users to deploy AI agents directly inside familiar tools for writing documents, analyzing data, generating code, and automating workflows. The company exited the second quarter with 15 million paid Microsoft 365 Copilot seats, while GitHub Copilot had 4.7 million paid subscribers.
Accelerating enterprise adoption
Large organizations are increasingly adopting Microsoft's agentic tools. Over 80% of the Fortune 500 companies have built agents using Copilot Studio and Agent Builder, the company's low-code tools for creating and deploying AI agents. Enterprises are also deploying Copilot at a large scale, with the number of customers using over 35,000 Copilot seats tripling year over year at the end of the second quarter. Hence, AI assistants are also moving beyond pilot programs and being integrated into enterprise technology stacks.
As companies deploy more agents through Copilot and other tools, demand for Azure computing capacity, Azure AI Foundry, and Fabric also rises. Hence, increasing adoption of agentic AI can be a solid positive for Microsoft's entire cloud ecosystem.
Strong fundamentals support an agentic AI opportunity
Microsoft is one of the largest, most profitable technology companies in the world. In the second quarter, the company's revenues increased 17% year over year to $81.3 billion, while earnings per share rose 24% year over year to $4.14. Operating income also increased 21% year over year to $38.3 billion, highlighting the strong profitability of the company's core business.
The company also exited the second quarter with nearly $89.5 billion in cash on its balance sheet. Hence, the company has significant financial flexibility to invest in AI-related growth initiatives.
Despite these strengths, Microsoft is currently trading at 25.7 times earnings, significantly below its historical three-year average price-to-earnings ratio of 33.7x. The company trades at a far more reasonable valuation than many smaller AI companies that are still unprofitable.
If the agentic AI market continues to grow at the expected pace, Microsoft's strength across infrastructure, platforms, and applications makes it a significant beneficiary of this opportunity. Hence, Microsoft appears to be an attractive stock for investors looking to gain exposure to the rapidly growing agentic AI market.
