Only 3.3 percent of Microsoft 365 and Office 365 users who touch Copilot Chat actually pay for it, an awkward figure that landed alongside Microsoft’s $37.5 billion quarterly AI splurge and its insistence that the payoff is coming.

That single percentage stat undermines the company’s carefully polished Copilot success story. On its Q2 FY26 earnings call, Microsoft repeatedly cited “record” AI momentum, telling investors it now has 15 million paid Microsoft 365 Copilot seats, with seat growth up more than 160 percent year-over-year. Satya Nadella described Copilot as “becoming a true daily habit,” claiming daily active users are up tenfold year-over-year and that average conversations per user have doubled.

What Microsoft did not articulate is how small that paid footprint looks against the vast base of Microsoft 365 users experimenting with Copilot Chat for free, as highlighted by Directions on Microsoft analyst Mary Jo Foley.

She said Microsoft has some 450 million commercial Microsoft 365 users, many of whom now have access to Copilot Chat at no additional cost. Once you ignore bundled deals and discounts, paid Copilot users are comparatively thin on the ground – an uncomfortable result given the scale of Microsoft’s AI spending.

Microsoft 365 Copilot launched in late 2023 as a $30 per user per month add-on, pitched as a productivity boost baked directly into Word, Outlook, Teams, Excel, and PowerPoint. Since then, Microsoft has worked hard to differentiate Copilot from other chatbots, recasting it as an AI “agent” that can search documents, meetings, and emails, and act on a user’s behalf. That promise – more automation, less prompting – is the future Microsoft keeps pointing to when it talks about why all this AI investment makes sense.

The Q&A with analysts on the call quickly zeroed in on the obvious concern: Microsoft is spending huge sums on AI, but is it paying off? CFO Amy Hood said judging that spend by Azure growth alone was the wrong yardstick. “I think many investors are doing a very direct correlation… between the capex spend and seeing an Azure revenue number,” she said.

Hood argued that a large share of Microsoft’s AI capacity is being allocated to its own products first, such as Microsoft 365 Copilot and GitHub Copilot, before being made available to external Azure customers. Nadella backed her up, telling investors to stop fixating on short-term uptake and focus on the long game.

“We don’t want to maximize just one business of ours,” he said. “You should think about M365 Copilot, GitHub Copilot, Dragon Copilot, Security Copilot – all of those have a GM [gross margin] profile and lifetime value.”

Maybe the argument holds eventually. For now, though, 15 million paid seats is awkward compared with the number of users getting Copilot Chat for nothing.

There are also signs Microsoft itself is still working out where AI genuinely adds value. A recent report from Windows Central suggests the company is reevaluating how aggressively it pushes Copilot inside Windows 11, with plans to streamline or even remove some AI features where they don’t make sense.

If even Microsoft is trimming parts of its AI rollout, the idea that Copilot adoption will naturally snowball into paid usage starts to look less inevitable than the earnings-call rhetoric suggests – a familiar concern given how closely investors have already been watching the company’s broader AI commitments. ®