Microsoft is starting to see meaningful pickup in paid subscriptions for its flagship AI assistant, Copilot for Microsoft 365, after months of Wall Street skepticism and internal hand-wringing over sluggish corporate adoption, according to an internal town hall meeting.
Judson Althoff, the company’s executive vice president and chief commercial officer, told employees on Thursday that the sales organization has made “greater inroads” with the $30-per-month add-on following a quiet but significant shift in strategy. The change came after early results disappointed analysts and customers alike, and after feedback made clear that simply pushing the full paid version while offering a stripped-down free chat tool wasn’t cutting it.
The remarks, from a transcript reviewed by CNBC, mark the most upbeat internal assessment yet of Copilot’s commercial progress. Launched to the general public in late 2023, the AI layer on top of Microsoft’s ubiquitous Office suite was supposed to be the clearest example of how generative AI could drive real revenue. Instead, for much of the past year, analysts described uptake as “nascent” at best.
In January, Microsoft disclosed it had reached 15 million paid Copilot seats — roughly 3 percent of total Microsoft 365 commercial seats. CEO Satya Nadella noted on the earnings call that the company had “multiples more” users on the limited-feature Copilot Chat. That disclosure landed with a thud. Analysts at UBS, who still recommend buying the stock, said at the time they had expected stronger numbers.
Althoff acknowledged the earlier missteps. Sales teams had been focused on landing full-fare seats while steering everyone else toward the free chat version. After pushback from both analysts and large customers, Microsoft reworked its playbook. The new approach appears to be working.
“Those were hit for Q3,” Althoff said, referring to the aggressive internal targets he and chief financial officer Amy Hood had set for the fiscal third quarter that ended Tuesday.
The company has already laid out even bolder goals for the current June quarter.
“I actually feel very confident in those numbers,” he added.
The comments land at a delicate moment for Microsoft. Its stock has dropped 23 percent in the first quarter amid growing investor anxiety that the enormous capital spending on AI data centers may not translate quickly enough into revenue and profit growth. With OpenAI and others also racing ahead, some on Wall Street have begun to wonder whether generative AI will intensify competition rather than hand Microsoft a lasting edge.
Copilot remains the most important test case. Enterprise buyers have been cautious, demanding clear proof that the AI assistant delivers measurable productivity gains before signing off on the extra monthly fee for hundreds or thousands of users. Many companies started with pilot programs, testing the tool on small teams before committing at scale. The revised sales strategy appears to have made it easier for customers to start small, see results, and then expand.
Microsoft has not yet released official March-quarter results, which are expected later this month. But Althoff’s tone inside the company suggests the commercial segment, its largest and most profitable business, is finally beginning to see the payoff from the heavy AI investments the company has been making for more than two years.
Copilot is central to Nadella’s vision of AI as the new computing platform, one that could lift usage across Azure cloud services as employees query the system more frequently and generate more data. If the momentum holds, it could help quiet some of the skepticism that has weighed on the stock and validate the billions Microsoft continues to pour into data centers.
Althoff’s message to employees was one of quiet relief mixed with ambition. After a slower-than-hoped rollout and plenty of second-guessing, Microsoft’s most visible AI product is showing the first clear signs of commercial traction.








