Microsoft’s AI Payoff: Record Profits Meet a Widening Divide

What’s New

Microsoft reported massive growth in its latest earnings (Q2 Fiscal Year 2026), released late January. Revenue hit $81.3 billion (up 17%), while net income surged 60% to $38.5 billion. The company’s cloud division, Azure, grew 39%, driven largely by demand for AI services.

Alongside financials, Microsoft released a report on global AI usage. It shows 1 in 6 people worldwide now use generative AI. However, a "digital divide" is growing. Adoption in the Global North reached 24.7%, nearly double the rate in the Global South (14.1%).

Why it matters

These figures signal a major shift: AI is no longer just a cost center—it is generating huge profits. The 60% jump in net income suggests Microsoft’s massive infrastructure bet is paying off financially.

For the wider world, the data highlights an equity issue. Wealthier nations are adopting these tools twice as fast as developing ones. This gap could worsen economic inequality if access to productivity-boosting technology remains uneven.

Background

Microsoft began its aggressive AI push in 2023 through its partnership with OpenAI. For the past two years, the company has spent tens of billions quarterly on data centers and chips to support this.

• Azure: Microsoft’s cloud computing platform, which powers AI apps for businesses.
• Adoption trends: In early 2025, usage was constrained by a lack of servers. Supply has improved, but demand still outstrips capacity.
• The Divide: The "Global North" refers to wealthy economies (e.g., U.S., Europe), while the "Global South" includes developing regions.

What we don’t know

We do not know when the "capacity constraints" will fully resolve. Executives warned that demand still exceeds their ability to build data centers.

We also don't know the full impact of competitors like DeepSeek. Microsoft’s report noted this open-source model is gaining traction in regions where Microsoft has less reach, such as parts of the Global South.

What’s next

Expect spending to remain high. Analysts predict top tech companies will spend over $700 billion combined on infrastructure in 2026.

Watch for Microsoft’s next move to close the adoption gap. The company may introduce lighter, cheaper models to compete with open-source rivals in emerging markets.