Inside Satya Nadella's Great AI reset at Microsoft

Copyright © HT Digital Streams Limit all rights reserved. What Satya Nadella’s latest shaking says about Microsoft’s AI strategy developing Microsoft’s initial momentum in AI comes from its data center capacity and its partnership with Openai. PHOTO: AP SUMMARY The company promoted Judson Althoff, its longtime sales boss, to his CEO of its commercial business, which freed Nadella to focus on the diversification of Microsoft’s AI strategy outside of Openai. What is his plan? Earlier this month, Microsoft Judson Althoff, his longtime sales boss, promoted to CEO of his commercial business and consolidated sales, marketing and operations in its products. The move is designed to free Satya Nadella, CEO, to focus on technical work, mostly artificial intelligence. Nadella said the reorganization is essential to grow its existing business and build a new border simultaneously, amid a ‘tectonic AI platform shift’. Microsoft’s initial momentum in AI comes from its data center capacity and its partnership with Openai. Now, with the intensification of the competition and external print mounting, Microsoft diversifies beyond Openai, its infrastructure refracts and reforms its core products. Partnership Strain Microsoft’s partnership with Openai, founded in 2019, was the key to its AI strategy. It invested more than $ 13 billion in the AI ​​booth, which secured exclusive cloud -hosting rights through Azure and integrated Openai’s technology into products such as Copilot and GitHub. The partnership helped Microsoft go ahead when Chatgpt was launched in 2022, which boosted Azure, which yielded $ 75 billion in revenue by July 2025. However, the relationship became tense. Openai, which has now become the world’s top private company, looked beyond Microsoft with an Oracle agreement of $ 300 billion and a partnership with Softbank and Nvidia to the Stargate Data Center project. A controversial ‘AGI clause’ can limit Microsoft’s access to future models as open artificial general intelligence. In response, Microsoft diversifies its AI portfolio, with models of Anthropic, Xai, Meta and others. The company is also developing its own AI model, Mai-1-Preview. Both companies signed a non-binding agreement for a continued partnership in September 2025. However, this partnership, once from the most important to Microsoft, is one of the most important, has become only one element in a broader, more careful approach. Infrastructure turns Microsoft’s move away from Openai is perhaps the most visible in its approach to infrastructure. Microsoft declined to be part of Openai’s $ 500 billion Stargate project, and preferred more diversified, global distributed facilities. It is great on its own AI infrastructure. Capital expenditure is expected to amount to $ 120 billion in FY26, from $ 88.2 billion in FY25 (Microsoft’s financial year runs from 1 July to 30 June the following year). This Capeex will fund projects such as Wisconsin’s Fairwater Data Center with NVIDIA GB200 GPUs and a $ 15 billion pressure in the UK infrastructure. Microsoft also bets on Neoclouds (specialized cloud suppliers that offer high-performance, AI-optimized infrastructure) to address capacity shortages. It committed more than $ 33 billion to Neocloud suppliers such as Nebius ($ 19.4 billion) and Coreweave. This gives the business faster access to advanced AI computer power. Of great importance is that the shift from internal workload to Neoclouds free Microsoft’s own data centers to serve profitable cloud customers. Data centers have been criticized by their environmental impact. Microsoft intends to become carbon negative by 2030. It moves in this direction by signing renewable energy transactions, including a 100-megawatt agreement with Japan’s Shizen energy, to start Pennsylvania’s three-mile nuclear reactor to generate 835 megawatts of electricity and to develop more efficient systems. Nadella, embedded intelligence to the reorganization, expects to increase its focus on product innovation. Microsoft bet that AI-powered applications will cause future growth. While AI models may have become commodized, the integration of its Copilot assistant in Microsoft 365 Microsoft could give a competitive advantage. It has already integrated copilot into Excel, teams, and other applications, and this approach has been successful with the traditional customers of the business – large businesses. Nearly 70% of Fortune 500 businesses use the service, with the daily use increasing significantly, Microsoft said. For example, Vodafone deployed Kopilot at 68,000 employees to tests that indicated time savings, while Barclays implement it for 100,000 workers worldwide, Microsoft said in recent earnings calls. The company also uses this strategy to compete in consumer markets. This month, it launched a $ 19.99 premium subscription that summarizes AI with traditional office applications, which challenges Chatgpt directly. Both commercial and consumer segments are growing. Although smaller than the commercial business, the consumer segment of Microsoft 365 to $ 7.4 billion in FY25 grew from $ 6.6 billion in the previous year. Game -Ikkel Microsoft’s game -section also sees changes as it acts on subscription services amid mounting financial pressure. The company purchased Activision Blizzard for $ 69 billion in 2023 to strengthen its Game Pass library, although the merger has criticized that it could harm developers and players. Game Pass reached 34 million subscribers and nearly $ 5 billion in FY25 turnover, but subscribers’ growth slowed down from 80% over 2020-2021 to 36% over 2022-2024. The day-one-release strategy for big titles was expensive. Microsoft has forfeited more than $ 300 million to Call of Duty sales by offering the game by offering the game pass instead of traditionally selling it, Bloomberg reports, citing a former employee. Microsoft recently raised the ultimate Game Pass prices by 50% to $ 30 per month, or $ 359.88 a year. Meanwhile, Xbox consoles are staring at steep competition from Sony PlayStation and Nintendo, with hardware income that drops 25% in FY25. Microsoft has raised consolet prices twice this year. The overall game revenue has dropped over the past two quarters. Political cross chairs Microsoft has ended FY25 with more than $ 101 billion in profit and $ 94.6 billion to cash reserves. However, the company has an increase in external pressure, including some of the Trump administration, which imposed a $ 100,000 fee on new H-1B visa applications, which limited Microsoft’s access to talent. Microsoft is a heavy user of H-1B visas, and Nadella itself was an H-1B visa holder early in his career. Last month, President Trump also demanded that Microsoft fire his president of the global affairs Lisa Monaco, citing the concerns about national security. There are also geopolitical factors in the game. Microsoft was forced to disable the Israeli military use of its software after finding evidence of mass supervision data of millions of Palestinian cellphone calls stored on his cloud servers. On the regulatory front, the company EU fines on teams merged have avoided little by offering separate versions and improving interoperability. Meanwhile, the UK’s Competition and Market Authority has found that Microsoft’s woolening practices are harming competition. Althoff’s promotion to lead commercial operations was meant to give Nadella space to focus on AI innovation. But while Microsoft partner tensions, regulatory investigation and political pressure navigate, he faces challenges that extend far beyond technical work, which requires strategic agility and diplomatic finesse equally. www.howindialives.com is a database and search engine for public data. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #In Maps #PlainFacts #ChatGPT #Openai #Artificial Intelligence Read Next Story