Microsoft touts M365 Copilot momentum, claims 15M paid users

Microsoft has for the first time reported Microsoft 365 Copilot adoption stats, boasting this week of 15 million paid seats (individual user licenses). There are “multiples more enterprise chat users” Microsoft CEO Satya Nadella said during the company’s earnings call Wednesday — a reference to Copilot Chat, a simplified version of the AI assistant available to Microsoft 365 customers at no extra cost. (Microsoft did not provide specific figures.)

Analysts said the number of paid user seats lags expectations at this stage, given the company’s efforts to market Microsoft 365 Copilot and position it as central to its AI strategy.

“Microsoft’s disclosure of 15 million Microsoft 365 Copilot paid users represents disappointing uptake of the tool — just 3.3% of the 450 million-strong Microsoft 365 user base, despite reorganizing the Microsoft 365 product and go-to-market around Copilot,” said J.P. Gownder, vice president and principal analyst at Forrester.

“My take is that businesses are still trying to figure out the best way to use Microsoft 365 Copilot, and are hesitant to take on another expense without knowing how it will help their worker productivity,” said Jack Gold, principal analyst at J. Gold Associates. 

He expects adoption to increase significantly over the next couple of years, though this will likely be tied to “contractual renewals and obligations that enterprises have to navigate, rather than simply adding on to existing contracts with Microsoft. It’s a similar situation to how enterprises viewed the migration to Microsoft 365 originally,” Gold said.

Microsoft 365 Copilot launched in late 2023 as a paid add-on for Microsoft 365 customers. It’s embedded into productivity applications such as Word, Teams, and Outlook, and is increasingly pitched as an AI agent that can perform tasks autonomously. 

Despite significant business interest in the Microsoft 365 Copilot and its potential to boost employee productivity, adoption has been sluggish. This is due to a range of factors, including a perceived lack of value and concerns about data security and governance.

In its earnings call, Microsoft reported a three-fold increase in the number of customers with more than 35,000 seats, compared to last year. (The total number was not provided.) That rise included deals with Fiserv, ING, NAST, the University of Kentucky, the University of Manchester, the US Department of Interior, and Westpac. “Publicis alone purchased over 95,000 seats for nearly all its employees,” said Nadella. 

In most cases, companies pay for a limited number of Microsoft 365 licenses, assigned to small groups within their workforce “due to the cost and lack of proven, measurable ROI,” said Gownder. 

“So, while a lot of organizations have a few licenses, few organizations hold a lot of licenses,” he said.

Microsoft also announced figures about individual usage. Microsoft 365 Copilot is becoming a “daily habit” for those with access to the AI assistant, Nadella said on the earnings call, with a 10-fold increase in daily active users compared to the previous year. In addition, the average number of user conversations with the AI assistant has doubled in the past year. In neither instance did Microsoft provide specific numbers.

In the medium term, Gownder said, Microsoft is repositioning the value proposition of the Microsoft 365 Copilot paid product. While it’s mostly considered an AI personal assistant inside Office apps, it also offers license holders a “powerful cost-containment promise in a world of growing agentic AI,” he said.

That’s because Microsoft 365 Copilot license holders gain unmetered access to Copilot Agents. “As organizations deploy more and more Copilot Agents, the value proposition of the license will broaden to include unmetered access to agents,” he said. 

The company still needs to prove the tools’ worth to businesses — and users. “Unless Microsoft can improve the Microsoft 365 Copilot product, both as a personal assistant and as an enabler of agentic AI, it might continue to struggle with adoption,” said Gownder.

During the earnings call, Microsoft highlighted increased revenue for its Microsoft 365 productivity suite, up 17%. The number of paid seats increased 6% year-on-year to 450 million, boosted by increased adoption among small and medium businesses. 

Microsoft recently announced price increases for Microsoft 365 customers that will begin July 1.Microsoft touts M365 Copilot momentum, claims 15M paid users – ComputerworldRead More