TLDR
- Multiple Microsoft sales divisions missed growth targets for Azure Foundry AI product in fiscal year ending June 2025
- Less than 20% of salespeople in one U.S. Azure unit met the 50% Foundry sales growth target
- Microsoft initially denied lowering quotas but The Information reported targets were cut from 100% to 50% growth in some units
- Stock dropped nearly 3% on the news before recovering to close down 1.5%
- Customers like Carlyle Group reduced spending on Copilot Studio after the software failed to reliably pull data from other applications
Microsoft shares fell Wednesday after reports emerged that sales teams across multiple divisions missed growth targets for AI products. The stock dropped as much as 3% before paring losses.
The struggles centered on Azure Foundry, an enterprise platform where companies build and manage AI agents. These AI agents are designed to carry out tasks autonomously for users and organizations.
According to The Information, less than one-fifth of salespeople in one U.S. Azure unit hit the 50% sales growth target for Foundry. In another unit, the original quota called for doubling Foundry sales.
Microsoft pushed back on the report through a spokesperson. The company said it has not lowered sales quotas or targets for its salespeople. However, The Information cited two salespeople in Azure’s cloud unit as sources.
The report noted that quotas were adjusted after most salespeople failed to meet the initial targets. One division saw its growth target cut from 100% to 50%.
Real-world adoption challenges are becoming apparent. Private equity firm Carlyle Group started using Copilot Studio last year to automate meeting summaries and financial models. The firm later reduced spending after the software struggled to reliably connect data from other applications.
Customer Resistance Shows Early Adoption Pains
The difficulties mirror broader industry trends. An MIT study from earlier this year found only 5% of AI projects advance beyond the pilot stage.
D.A. Davidson analyst Gil Luria said the report shows the industry is in early stages of AI adoption. He noted this doesn’t mean AI products lack promise for productivity gains. It may just be harder than expected.
Microsoft faces pressure to prove returns on massive AI spending. The company reported record capital expenditure of nearly $35 billion in its fiscal first quarter in October. Management warned spending would increase this year.
U.S. tech giants expect to spend around $400 billion on AI in 2025. Companies say the spending is necessary to overcome supply constraints limiting their ability to meet AI demand.
Azure Growth Remains Strong Despite Sales Challenges
Microsoft has predicted it will remain short on AI capacity until at least June 2026. That marks the end of its current fiscal year.
The spending has delivered results in some areas. Azure cloud-computing revenue grew 40% in the July-September period. The growth rate beat analyst expectations.
Microsoft’s fiscal second-quarter forecast also came in above estimates. The AI push helped Microsoft become the second company to reach a $4 trillion valuation this year after Nvidia.
The company’s market value has retreated since hitting that milestone. Competition in the AI agent space is heating up. OpenAI, Google, Anthropic, Salesforce, and Amazon all offer tools to create and manage AI assistants.
Traditional businesses haven’t adopted these tools at the same pace as other parts of the AI ecosystem. The gap between AI infrastructure spending and product adoption is drawing investor scrutiny.
The Information report noted it’s rare for Microsoft to lower quotas for specific products. The Azure division draws close investor attention as the main beneficiary of Microsoft’s AI strategy.
Microsoft’s early bet on ChatGPT-maker OpenAI positioned the company as one of the biggest winners of the AI boom. The partnership gave Microsoft access to cutting-edge AI technology ahead of competitors.
The sales challenges come as CEO Satya Nadella continues pushing AI integration across Microsoft’s product line. Azure Foundry represents a key piece of that strategy for enterprise customers.
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