Microsoft shifts Copilot strategy to paid subscriptions after investor pressure
Microsoft has abandoned its free-bundling approach for Copilot and is now focused on selling the AI tool as a paid subscription to corporate customers. The pivot came after investors balked at the company's January disclosure that only 3% of its customer base was paying for the workplace assistant.
Judson Althoff, CEO of Microsoft's commercial business, told staff during an internal meeting Thursday that the company hit "some pretty audacious goals" for Copilot paid subscriptions in the quarter ending in March. Microsoft declined to comment on the remarks.
The shift reflects Wall Street's frustration with Microsoft's initial strategy. Through 2025, the company offered Copilot free to existing Office software customers while also selling paid subscriptions. That approach failed to drive adoption at the pace investors expected.
Microsoft's stock has fallen 24% this year through Wednesday, significantly underperforming the S&P 500. The company's Copilot adoption numbers fueled concerns that its massive AI investments weren't translating to revenue.
New pricing and targets
Microsoft's workplace AI tool costs about $30 per user per month. The company recently bundled it with other office software at roughly $99 per month, targeting its 450 million Office users.
Althoff said the company's paid subscription targets for the current quarter will be "materially ahead" of the 3% figure reported in January. He did not specify what that target is.
The executive framed the sales effort as a competitive necessity. "We're in a dog fight right now each and every day at the face of every single customer," Althoff said, citing competition from OpenAI and others.
Microsoft's pitch emphasizes access to multiple AI models in a secure environment, according to Althoff's remarks.
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