Satya Nadella has a new metaphor for Microsoft Corp's (NASDAQ:MSFT) AI empire — and it's as industrial as it sounds. "How efficient is our planet-scale token factory?" he asked investors at the first quarter earnings call, describing the company's sprawling global network of AI data centers.
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Building The World's Most Efficient AI Infrastructure
The "token factory" is Nadella's shorthand for Microsoft's AI infrastructure — a constantly modernizing fleet that powers everything from GPT-5 training to Copilot queries.
"It's not like we buy one version of Nvidia and load up for all the gigawatts we have," he said. "You write the Moore's law — you continuously modernize and depreciate it."
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AI Products Are The New Growth Engine
That approach is already paying off. Nadella revealed Microsoft has improved efficiency by "30% on both serving up GPT-4.1 and 5.0," thanks to software optimization that boosts performance across chips from Nvidia's H100s to GB200s.
The goal: do more with every watt, every GPU, and every dollar of capital.
But Microsoft's AI push isn't just about infrastructure — it's about expansion. Nadella drew a direct line between AI and the company's past cloud revolution: "The same thing that happened between server and cloud… is happening in AI."
Products like M365 Copilot and GitHub Copilot are already expanding revenue per user, turning each software seat into a higher-margin AI subscription.
The Next Frontier: Ads Meet AI Subscriptions
Even consumer products are getting the AI treatment, as Nadella teased opportunities that blend "ads plus subscriptions," creating new hybrid revenue streams.
The "token factory" may sound abstract, but it's the engine behind Microsoft's $77.7 billion quarter. By fusing constant hardware upgrades with smarter AI systems, Nadella is building an AI economy that prints both tokens and profits.
The next big thing for Microsoft investors isn't AGI (artificial general intelligence)— it's efficiency at scale.
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