Microsoft starts providing an AI tool for Office, which has the potential to generate $10 billion per year by 2026

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Microsoft starts providing an AI tool for Office, which has the potential to generate $10 billion per year by 2026
Microsoft starts providing an AI tool for Office, which has the potential to generate $10 billion per year by 2026

Microsoft began selling the Microsoft 365 Copilot artificial intelligence add-on for its Office software subscriptions aimed at companies on Wednesday.

Microsoft is poised to enter its next growth phase. The company began selling the Microsoft 365 Copilot artificial intelligence add-on for its Office app subscriptions aimed at companies on Wednesday.

The tool, which is available in Word, Excel, and other Office applications, will cost $30 per person every month. According to Piper Sandler analysts Brent Bracelin and Hannah Rudoff, this may amount to more than $10 billion in annualized income by 2026.

Microsoft intends to capitalize on its overwhelming lead in the productivity software sector, where Google has been attempting to acquire a foothold. Meanwhile, Google is selling the Duet AI upgrade in exchange for Workspace tool subscriptions.

According to Piper Sandler’s model, 18% of eligible customers will use Copilot. That may seem harsh, but “there’s going to be a FOMO element to this,” Bracelin said in an interview on Tuesday, using the acronym for fear of missing out. “If you’re in an industry competing against someone that has Copilot and you don’t, you’re at a disadvantage.”

Piper Sandler has a buy rating on Microsoft shares, which are up 41% this year vs. a 9% increase for the broader S&P 500 index.

“Customers tell us that once they use Copilot, they can’t imagine working without it,” Microsoft CEO Satya Nadella said last week during a conference call with investors.

Following the March announcement of Copilot’s ambitions, Microsoft said in September that it would first target the largest corporations. On last week’s call, Nadella stated that 40% of the Fortune 100, a ranking of the largest firms in the United States by revenue, were using Copilot in an invitation-only premium early-access program announced in May, naming five clients by name: Bayer, KPMG, Mayo Clinic, Suncorp, and Visa.

The preview was announced less than six months ago, in May. As a result, there isn’t a lot of information about how Copilot affects performance.

“A lot of the conversations we’ve had even with the early-access customers are too short to really look at the qualitative aspects of how they’re using the tools,” said Jason Wong, a research analyst.

According to Piper Sandler’s Bracelin, it may be simpler for corporations to distribute Copilot to the majority of highly paid executives whose time is valuable. The application could assist them in prioritizing email messages and swiftly comprehending content.

However, Wong believes that the top brass may end up producing problems for tech support. Wong suggests giving Copilot to technically competent individuals who have used generative AI for personal use and are familiar with flaws such as the potential for erroneous information. On its website, Microsoft admits that “the responses that generative AI produces aren’t guaranteed to be 100% factual.”

That hasn’t stopped people from utilizing ChatGPT, the Microsoft-backed OpenAI chatbot whose language models are at the heart of Copilot. Following the release of ChatGPT in November 2022, Microsoft and other large software businesses rushed to include comparable generative features. According to Microsoft, prompts and responses in Copilot are not utilized to train language models or comply with the company’s privacy guidelines.

Microsoft will benefit from the new monthly Copilot costs in more ways than one. Companies may wind up using additional Azure cloud services, such as Purview for data management, while putting up the tool, according to Wong.

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