For two years, investors and IT buyers have asked Microsoft the same thing about Copilot: are people paying for it, and are they using it? For the past three quarters the answer has come with a number attached. This quarter it didn't.
Microsoft's first-quarter fiscal 2027 results, for the three months to September 30, were strong. Revenue rose 19% to $92.3 billion and Microsoft Cloud revenue grew 30% to $63.9 billion. Yet the figure that has become the industry's barometer for workplace AI, paid Microsoft 365 Copilot seats, was missing from both the release and the call. In its place came usage growth, consumption credits and a new top-tier license.
That is more than a change in what Microsoft reports. The company is moving the measure of its AI business from seats to usage, and the way it bills customers is moving with it. For buyers, that means an AI bill that is harder to forecast. Yet the same results suggest customers have more leverage at renewal than the headline growth implies.
A strong quarter, minus one number
On most measures, Microsoft had little to hide. Operating income rose 21% to $45.9 billion. Commercial remaining performance obligation, the contracted revenue Microsoft has yet to recognize, rose 73% to $677 billion. Shares rose 4% in extended trading, CNBC reported.
CNBC also noted that the company "did not disclose the number of paid seats." When an analyst pressed the point on the call, CFO Amy Hood didn't dodge it. "We did not disclose, to answer your direct question, an update on the Copilot number this quarter. We talked about momentum in revenue and usage," she said.
Why the missing number matters
The seat count has been the yardstick because Microsoft made it one. When the company first disclosed 15 million paid seats in January, J.P. Gownder, vice president and principal analyst at Forrester, called it "disappointing uptake of the tool," Computerworld reported.
Microsoft answered the doubters quarter by quarter. It reported more than 20 million in April and, in its Q4 FY26 results, "over 30 million paid seats," double January's figure and a milestone we reported in July. Having built the benchmark, Microsoft has now stopped updating it, so there is no way to tell whether paid adoption kept pace.
The timing is awkward. Alphabet reported the same day, and Google Cloud CEO Thomas Kurian put a number on it. "Across all our AI services, we have sold more than 100 million seats for knowledge work," he told analysts.
What Microsoft offered instead was usage. Chairman and CEO Satya Nadella described Copilot as "one product experience across commercial and consumer," and said: "Daily users are up nearly 50 percent quarter over quarter, and over 5X year over year." Automated tasks, he said, "have nearly doubled since July."
Those are big multiples, but Microsoft gave no base for them, nor said whether the daily-user figure counts business users alone. They tell buyers that Copilot is being used more, not how many organizations are paying for it.
The deployment signals were more concrete. Nadella said the number of customers with more than 50,000 Copilot seats "increased over 8X year over year." Volkswagen, he added, plans to deploy Copilot to more than 330,000 employees, "one of the largest deployments to date in Europe."
Underneath it: from seats to meters
The reason for the shift became clear when Nadella explained how Microsoft now makes money from AI. "Our business model is expanding from per-seat subscriptions to include consumption, expanding our TAM and ARPU," he told analysts.
He described two funding streams. The subscription brings everyday AI to every user, and "typically, IT funds this." Then, "as agents take on higher-value work, consumption opens up business-funded demand, with spending tied directly to the value these agents deliver." That second stream is already growing fast: the number of Copilot customers "actively consuming credits through usage-based billing grew over 75 percent over the quarter."
Seen that way, a seat count captures only half the business, and increasingly the less dynamic half.
The seat half is being pushed upmarket. E7, the suite that combines Copilot, E5, Entra and Agent 365, went on sale on May 1, and UC Today covered the launch of Microsoft's $99 E7 tier in March. Nadella said "thousands of customers" have bought it, and Hood said E7 "has already reached millions of paid seats."
The seat price is only the start, though. In a June analysis for Directions on Microsoft, licensing adviser Lane Shelton wrote that "the $99 number, on its own, is only the down payment on the total investment required to operate E7 at scale." Consumption meters such as Copilot Studio credits, he noted, are not included in E7.
Further down the market, pay-as-you-go is becoming the default rather than an option. In a Partner Center announcement, Microsoft says usage-based billing will be on by default for new Microsoft 365 Copilot Business licenses bought through CSP from December 1, 2026. The default spending limit is 4,000 Copilot Credits per user per month, which admins can adjust. The change will initially not be available in 11 markets, including France and Germany, though the UK is not among them.
