Satya Nadella reinvented Microsoft with the cloud - now, can his AI strategy make it more valuable than Apple by 2027

Microsoft has already undergone one major reinvention under Satya Nadella. Now, as artificial intelligence reshapes the technology industry, the Microsoft CEO is facing another test: turning the company’s early AI investments and massive cloud business into a more convincing AI growth story.

The question is no longer whether Microsoft is participating in the AI boom. It is whether Nadella can make the company’s AI products and business model translate into the kind of momentum investors expect.

Satya Nadella Has Reinvented Microsoft Before

Nadella became Microsoft CEO in 2014, succeeding Steve Ballmer at a time when the company was increasingly viewed as a legacy software business.


He pushed Microsoft toward cloud computing and subscription-based software, moving away from perpetual Office licenses. He also allowed customers to integrate products from competitors such as Oracle and Salesforce.

Under Nadella, Microsoft expanded through acquisitions including Mojang, LinkedIn and GitHub.

Microsoft Was Early to AI, But the Lead Has Not Been Enough

Microsoft moved aggressively into artificial intelligence through its investment in OpenAI in 2019 and it later collaborated with OpenAI to launch GitHub Copilot in 2021, before ChatGPT became a household name.

Yet the company has not emerged as the undisputed AI leader.

Nvidia dominates AI chips, while Anthropic and OpenAI have leading models. Meta has released a mass-market personal agent, and Google’s Gemini-powered services have gained traction among businesses and consumers.

Microsoft’s position is complicated further by the changing relationship with OpenAI. The company has lost its status as OpenAI’s exclusive cloud provider, while its license on OpenAI intellectual property became nonexclusive.

Microsoft said in April that it continues to serve as OpenAI’s “primary cloud partner.”

Copilot Is the Big Test for Microsoft’s AI Strategy

Copilot is at the center of Microsoft’s push to bring AI into the workplace, but adoption has not been as widespread as the company would like.

Microsoft 365 Copilot had reached 30 million paid seats, compared with a commercial Office 365 base of more than 450 million.

Tiffany Wade, co-portfolio manager at Microsoft shareholder Columbia Threadneedle, said there are still unknowns surrounding Copilot, including the product’s maturity and pricing, according to a CNBC report.

Microsoft is also changing how it charges for some AI services.

Microsoft Is Moving Beyond Fixed Subscription Pricing

Nadella has acknowledged that Microsoft needs to adapt its business model to an AI environment increasingly based on consumption.

Instead of relying only on fixed per-user subscription pricing, Microsoft is moving toward usage-based billing, where customers pay according to how intensively they use the technology.

The company introduced usage-based billing for Copilot Cowork, with Nadella saying thousands of customers were already paying for and actively using it.

The change reflects the economics of AI, where computing usage and tokens play a central role.

Microsoft has also seen evidence that consumption-based pricing can accelerate revenue. GitHub Copilot reached 50 million users by July, up from 26 million the previous October. Nadella said sales growth accelerated 60% from the previous quarter after the new model was introduced, as per the CNBC report.

Azure Gives Microsoft Another AI Advantage

While Copilot remains a work in progress, Microsoft’s cloud business provides another major part of its AI story.

According to 24/7 Wall St., Azure passed $100 billion in annual revenue, while Microsoft’s commercial remaining performance obligations reached $678 billion. Microsoft 365 Copilot also topped 30 million paid seats.

Azure grew 43% in the June quarter, while Microsoft 365 consumer cloud revenue increased 24% and commercial cloud revenue rose 14%, according to the details provided by the Motley Fool.

The figures point to AI opportunities extending beyond Microsoft's Copilot products.

Microsoft’s AI Spending Could Become the Biggest Question

The bullish case comes with a significant spending requirement.

As per 24/7 Wall St, Microsoft’s fiscal 2026 capital expenditures rose 79.62% to $115.95 billion, while free cash flow declined 6.46%. Management expects fiscal 2027 capital expenditures of roughly $175 billion.

That spending creates another test for Microsoft’s AI strategy: whether the returns from its infrastructure investments can justify the scale of the outlay.

The company’s bull case from 24/7 Wall St. reaches $727.41, while its bear case is $533.45.

Could Microsoft Eventually Become More Valuable Than Apple

Microsoft and Apple remain among the world’s largest companies, but the valuation gap is currently substantial.

As per the Motley Fool, Apple’s market capitalization is at about $4.9 trillion and Microsoft’s at about $3.9 trillion. According to the report, Microsoft’s AI opportunities could help close that gap and predicts Microsoft could become the more valuable company by the end of 2027.

That view rests partly on Microsoft’s lower valuation as Microsoft is at 29 times trailing profits compared with Apple at 38 times.

Wall Street Is Still Waiting for the AI Story to Mature

Despite Microsoft’s size and recent gains, the stock has not kept pace with some of its megacap peers and the Nasdaq this year.

Microsoft shares were up 7% as of Friday’s close, even after a sharp third-quarter rally, and the company had not beaten the S&P 500 in a calendar year since 2023.

Nadella’s Second Reinvention Is Now Underway

The challenge for Nadella is therefore different from the one he faced after taking over Microsoft.

The first transformation moved the company toward cloud computing and subscriptions. The second requires Microsoft to adapt its products and pricing to an AI economy while competing with companies that are moving quickly at the model and application layers.

Nadella told Microsoft customers in Seattle that AI needs “diffusion inside the enterprise,” emphasizing the importance of widespread deployment, as per the CNBC report.