The company claims that thanks to software optimisation and hardware asset management, it can make datacentre kit last six years, and has already contracted GPUs for most of their useful life to customers<\/b>
\nThe company claims that thanks to software optimisation and hardware asset management, it can make datacentre kit last six years, and has already contracted GPUs for most of their useful life to customers
Among the insights revealed during the latest quarterly earnings call from Microsoft is that it is de-risking its artificial intelligence (AI) acceleration expansion, with customers already contracted to buy graphics processor unit (GPU) capacity.
The company reported that Microsoft Cloud revenue surpassed $50bn for the first time, growing 26% year over year (YoY). Overall, it reported revenue of $81.3bn, up 17% YoY.
Microsoft said that it has expanded global datacentre capacity, adding nearly one gigawatt of total capacity this quarter and stating there has been a10x increase in growth of Microsoft 365 Copilot daily users. The company said it is making continued investment in AI infrastructure to meet the growing demand for Azure, M365 Copilot, and GitHub Copilot.
When asked about hardware capital expenditure, chief financial officer Amy Hood said: \u201cThe majority of the capital that we\u2019re spending today, and a lot of the GPUs that we\u2019re buying, are already contracted for most of their useful life.\u201d
She said that the Microsoft 365 subscription has a faster payback when compared to Azure, which has a mix of compute usage and GPU. Looking at how Microsoft de-risks its GPU investments, she said GPU contracts are sold for the entire useful life of the GPU.
Microsoft\u2019s AI infrastructure is being used to support heterogeneous and distributed workloads. The company\u2019s stated goal is to optimise for \u201ctokens per watt per dollar\u201d, which involves increasing hardware utilisation and reducing total cost of ownership (TCO) through advancements in silicon, systems and software.
Microsoft said that it is seeing a six-year useful life for the servers and GPUs in its datacentre fleet. Expanding on Hood\u2019s response, CEO Satya Nadella discussed the benefits of software optimisation in Microsoft datacentres in extending server life.
\u201cWe use software to continuously run even the latest models on the fleet,\u201d he said. \u201cThat\u2019s what gives us [longevity]. That\u2019s why we think about ageing the fleet constantly. It\u2019s not about buying gear one year \u2013 it\u2019s about each year you ride Moore\u2019s Law, you add and use software, and then you optimise across all of it.\u201d
Following on from the announcement of Microsoft\u2019s Maia 200 AI acceleration hardware, Nadella was asked if the company would be putting more focus on silicon. In response, Nadella spoke about the opportunity to optimise workloads: \u201cWhen you have a new workload, you can start innovating end to end between the model and the silicon and the entire system. It\u2019s just not even about just the silicon\u201d
According to Nadella, innovation includes the way the networking works at rack scale, which needs to be optimised to speed up memory access needed by the workload.
Alongside the investment in silicon and a strategy to increase the longevity of server hardware, Microsoft has seen a shift in what customers are looking for from cloud providers.
\u201cSovereignty is increasingly top of mind for customers, and we are expanding our solutions and global footprint to match,\u201d said Nadella. \u201cWe announced DC investments in seven countries this quarter alone, supporting local data residency needs. And we offer the most comprehensive set of sovereignty solutions across public, private and national partner clouds, so customers can choose the right approach for each workload, with the local control they require.\u201d
Discussing the earnings call, senior analyst Dario Maisto said: \u201cThe earnings call brought us back to the fundamentals after months of hype. In the cloud space, customers are now much more cautious about what they buy and how they pay for it.
\u201cAs an effect of digital sovereignty concerns, clients are moving from a best of breed and hyperscaler-only approach to more selective and price-sensitive buying behaviour, and are now much more open to considering local players than they have in the past.\u201d<\/p>\n