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In January 2024, Office 365 quietly reached 400 million paid seats. Microsoft (MSFT 0.26%) products are as integrated into our professional lives as meetings that could’ve been emails, but these “boring” and decades-old tools are the fuel Microsoft is using to compete in the artificial intelligence (AI) race.

As AI progresses and automates away chunks of the professional world as we know it, the legacy suite of Microsoft 365 products shows no signs of slowing down. This ability to quietly and reliably generate revenue is funding Microsoft’s riskier AI bets.

Office products generated $54.9 billion in fiscal year 2024 (the 12 months ended in June 2024). That was 22% of all of Microsoft’s revenue. Microsoft 365 will keep the company on the leaderboard of AI innovators for years to come. This is great news for long-term Microsoft investors.

Image source: Getty Images.

Microsoft’s lagging AI strategy

Microsoft is still playing catch-up when it comes to generative AI. OpenAI leads with more than 200 million weekly active users and set the gold standard with the release of ChatGPT in 2022. Alphabet‘s Google and Meta Platforms both have models nearly equivalent to OpenAI.

Compared to these companies, Microsoft got a late start in deciding on an AI strategy. However, it has since closed the gap significantly by partnering with competitor OpenAI and, as of the end of 2024, was beginning to build models in-house.

Microsoft also purchased billions in Nvidia chips and continues to innovate on its cloud computing platform, Azure, and agentic powerhouse, Copilot. These strategic moves are, thus far, keeping pace with the other major players in the AI industry.

Microsoft requires immense amounts of capital to remain competitive in the AI landscape. Fortunately, its decades-old productivity and business lines are the stable engine propelling Microsoft into its new, automated era.

The Office moat

Normally, when one thinks of a legacy business, it’s of an outdated, shrinking portion of revenue. That is not the case with Microsoft’s Office products. Microsoft 365, including the applications Excel, Word, PowerPoint, Teams, and Outlook, is still growing by double digits year over year.

This indicates these product lines are not only here to stay, but are so universally adopted by businesses and individuals alike that it’ll be nearly impossible to dethrone them anytime soon.

These products are also mostly recession-resistant, as businesses are unlikely to cut them in an economic downturn. Microsoft also switched to a subscription model more than a decade ago, making revenue from these lines of business extraordinarily predictable and dependable.

The significant growth in the legacy products is also great news for the capital-intensive investments Microsoft will need to continue making for the next several years. Microsoft reports that it’s on track to invest approximately $80 billion to build out AI-enabled data centers for training and deploying AI models and applications.

Microsoft’s AI revenue is exploding

In its earnings call on July 30, Microsoft revealed Azure’s income for the first time: a whopping $75 billion, an increase of 34%, according to chairman and CEO Satya Nadella.

The CEO added, “Cloud and AI is the driving force of business transformation across every industry and sector. We’re innovating across the tech stack to help customers adapt and grow in this new era.”

Microsoft’s market cap is approaching $4 trillion, and there seems to be quite a bit of room left for growth, particularly if the company’s big AI bets pay off.

Microsoft remains a top competitor

For investors, Microsoft remains a solid long-term play, largely because of the stable products users have known for years. With a quarterly dividend of $0.91 per share, investors are rewarded on both the value and growth side, though the dividend yield is under 1%. Microsoft’s burgeoning agentic and innovative technologies will continue to produce massive revenue alongside mature, reliable products.

Overall, Microsoft’s total revenue increased 18% from Q4 2024 to Q4 2025. There’s plenty of risk associated with investing in AI technologies, but thanks to Microsoft’s steady lines of business, the downside is far less than that of many competitors.

US tech giant Microsoft says it has stopped the Israeli military from accessing its cloud computing and AI technology.

The move follows an investigation that found that Israeli forces had been using Microsoft’s powerful Azure services for mass surveillance and attacks in Gaza and the occupied West Bank.

But has Microsoft’s decision come too late? And what can be done to stop Israel from simply finding a replacement from another powerful software supplier?

Presenter: Neave Barker

Guests:

Rob Pegoraro – Technology journalist and analyst

Taghreed El-Khodary – Palestinian journalist and analyst

Kenneth Roth – Former executive director of Human Rights Watch and author of Righting Wrongs: My Life in Human Rights

Sept. 12 (UPI) — The European Union has accepted assurance from Microsoft that it will cease forcing its Teams application onto users and allow similar apps a chance to compete.

“Today, the European Commission has accepted commitments from Microsoft addressing its concerns that the distribution of Teams, Microsoft’s communication and collaboration product, harmed competition,” said EU Director for Information, Technology, Communication and Media Carlota Reyners Fontana in a video statement posted to social media Friday.

Those commitments mean that Microsoft will detangle Teams from its Office 365 and Microsoft 365 suites for business customers, freeing up consumers to obtain productivity apps like Excel, Outlook, PowerPoint and Word minus Teams for a lesser cost.

The promise also long-term licensed Microsoft customers the ability to switch out of suites that contain Teams, to allow competing apps to operate on Microsoft products and permit users to move data out of Teams and into competing apps.

However, should the commission deem Microsoft to be skirting its commitments, it could be fined as much as 10% of its global profits, or face 5% fines daily until in compliance.

The European Commission opened proceedings against Microsoft in July of 2023 following complaints by the companies behind the Slack and Alfaview communication apps for potentially breaching EU competition rules and determined that by tying Teams to its suites, the company “abused its dominant position,” according to Fontana.

“Teams competitors could not offset that advantage,” she continued.

In a press release, the European Commission announced Thursday that the guarantees made by Microsoft are now considered legally binding under EU antitrust rules.

“By helping to restore fair competition, these commitments will open up the market for other providers of communication and collaboration tools in Europe,” the commission stated in a press release on Thursday.

Teams features calling, messaging, video meetings and file sharing cloud-based capabilities that can further tie into other Microsoft apps. When Teams was first released, it was bundled with Office 365 and Microsoft 365.

After the commission opened its investigation, Microsoft at first released some suite options without Teams in 2023 and 2024, but “these changes were insufficient to address its concerns and that more extensive changes were necessary to effectively end the anticompetitive tying practice and its effects,” the release noted.

Microsoft then arrived at the commitments eventually accepted by the commission in May, and after market testing both Slack and Alfaview withdrew their complaints.

The commitments made by Microsoft will remain in effect for seven years, except for the interoperability and data portability promises, which will stand for 10 years.

It was the second time in one day that the FTC pulled out of litigation begun during the Biden administration.

The Republican-controlled Federal Trade Commission is abandoning a Biden-era effort to block Microsoft’s purchase of Call of Duty video game maker Activision Blizzard.

In an order issued Thursday, the FTC said it had determined that “the public interest is best served by dismissing the administrative litigation in this case.”

It was the second time in one day that the FTC pulled out of litigation begun during the administration of former President Joe Biden, a Democrat. Earlier Thursday, the FTC said it was dismissing a lawsuit against PepsiCo that was filed by the Democratic-controlled FTC in January.

Microsoft announced a $69bn acquisition of Activision in January 2022. It was one of the most expensive tech acquisitions in history and was designed to boost sales of Microsoft’s Xbox gaming console, which has lagged in sales behind Sony’s PlayStation and Nintendo.

In December 2022, the FTC – then led by Democratic Chairwoman Lina Khan – sued to temporarily block the acquisition, saying it would let Microsoft suppress competitors who want access to Xbox and its subscription content.

In July 2023, the United States District Court in Northern California denied the FTC’s request to pause the acquisition, but the FTC appealed. Earlier this month, a federal appeals court also denied the FTC’s request.

In the meantime, Microsoft completed its purchase of Activision in October 2023 after it won approval from the United Kingdom’s competition watchdog, which had also considered blocking the merger.

Brad Smith, Microsoft’s vice chairman and president, said Thursday in a statement on X that the decision is a victory for video game players and for “common sense in Washington DC”.

“We are grateful to the FTC for today’s announcement,” Smith said.

Political actions

Khan stepped down from the FTC when President Donald Trump took office in January, and Trump fired Democratic Commissioners Rebecca Slaughter and Alvaro Bedoya in March. Bedoya and Slaughter have sued the Trump administration, saying their removal was illegal.

Right now, the FTC is made up of three Republican commissioners, and it’s unclear when the two Democrats on the commission will be replaced. A message seeking comment was left with the FTC.

In the PepsiCo case, FTC Chairman Andrew Ferguson said the Biden-era FTC rushed to authorise a case just three days before Trump’s inauguration. He said on Thursday that the case, which alleged that PepsiCo was violating the law by giving unfair price advantages to Walmart, was a “dubious political stunt”.

But the FTC hasn’t stood in the way of some Biden-era policies. Earlier this month, a rule the FTC announced in December requiring ticket sellers, hotels, vacation rental platforms and others to disclose their fees upfront went into effect.