Microsoft executives are asking why CEO Satya Nadella is feeding rivals’ products before his own
Three years ago Satya Nadella was the man who started the AI race. In February 2023 he stood in front of a packed audience outside Seattle, unveiled an AI-powered Bing, and told Google the fight was on. CNN Business made him CEO of the Year. One former Microsoft executive told Business Insider he was “like a superhero” back then.The scoreboard reads differently now. Microsoft’s stock is down more than 24% from a year ago, the worst showing in the Magnificent 7. Copilot trails ChatGPT and Claude. Xbox’s boss has called the business “not healthy”. And inside the company, according to Business Insider’s reporting, executives are openly questioning where the compute from a record $190 billion capital spending year is actually going—because a lot of it is not going to Microsoft’s own products.
Microsoft CFO Amy Hood put Azure customers last in the GPU queue, and the stock fell 10% the same week
On the January earnings call, CFO Amy Hood laid out Microsoft’s allocation order without much diplomacy. First-party apps first: sales usage, M365 Copilot, GitHub Copilot. Then long-term R&D and product innovation. Whatever survives that goes to Azure customers.Hood offered a number to soften it. Had those GPUs gone to Azure instead of Microsoft’s own AI products in the first half of the fiscal year, Azure growth would have hit just over 40% rather than 39%. Investors weren’t soothed. The stock fell more than 10% after that report, with the slower Azure outlook landing badly against record AI spending.
Microsoft’s $190 billion AI capex has it renting compute from Amazon and Google after GitHub outages
Executives told Business Insider the tradeoffs have only sharpened since. Demand for infrastructure is outrunning Microsoft’s ability to build it, and $190 billion in capex has not closed the gap.The workarounds are telling. After a run of GitHub outages this year, Amazon stepped in to help. Microsoft looked at leasing Oracle infrastructure and walked away over security and compliance concerns. It is now evaluating Amazon and Google for more capacity. “We are shopping for capacity everywhere,” one person familiar with the talks said.Meanwhile the Azure sales team is being asked to sell more of a product Microsoft is struggling to supply. Some quotas have gone up by 30% this year.
‘All of the supply is gone’: why Microsoft executives say frontier labs and Adobe come before M365 Copilot
The internal frustration is specific. “All of the supply is gone once you solve for frontier labs and our internal businesses like M365 and Microsoft AI,” one executive told Business Insider.Another put it more bluntly, asking why Nadella would prioritise growing Adobe over growing M365—Adobe being an Azure tenant burning capacity that Microsoft’s own productivity suite could use. “I have no idea how we’re going to land that message with customers,” the person said.That tension sits on top of a company already being reshaped. Nadella promoted Judson Althoff to run the commercial business, retired the traditional senior leadership team structure, and watched Rajesh Jha retire and Yusuf Mehdi prepare to leave. The performance review system has been overhauled into five sharper categories, which executives say feels like a return to Ballmer-era stack ranking. “It’s almost like the old era of Microsoft is back,” one former executive said. “The old Windows era where you lead with a lot of fear and a billy club in your hand.”Microsoft’s fourth-quarter results will show whether the spending is working. The internal question is simpler: who is it working for.
