Microsoft said on 28 October 2026 that the number of Copilot customers actively consuming credits through usage-based billing grew over 75% in the quarter to 30 September. Chief executive Satya Nadella said in his prepared remarks on the earnings call: “Our business model is expanding from per-seat subscriptions to include consumption, expanding our TAM and ARPU.”
Microsoft gave no updated count of Copilot seats. Asked on the call, chief financial officer Amy Hood said, according to a machine transcript of the webcast: “We talked about momentum and revenue and usage.”
Business Pill · Usage-Based Pricing
An evergreen Business Engineer explainer on usage-based pricing. It explains the general idea only and does not discuss Microsoft’s results.
The key insight: By our count, Nadella’s official remarks gave five usage or consumption growth figures for Copilot and GitHub and no total seat count, while Microsoft 365 commercial cloudrevenue grew 12 points faster than seats.
Nadella described two ways customers now pay. On the subscription, he said: “Typically, IT funds this, consolidating frontier advances for everyone across the organization.” On usage, he said: “And as agents take on higher-value work, consumption opens up business-funded demand, with spending tied directly to the value these agents deliver.”
The seat side is still growing at the top end. Nadella said “The number of customers with more than 50,000 Copilot seats increased over 8X year over year”, naming Capgemini, HCLTech, Hitachi Group, Truist Financial and the UK Revenue and Customs Department, and said Volkswagen announced plans to deploy Copilot to more than 330,000 employees.
Hood said in her prepared remarks that E7, the suite that bundles Copilot with E5, Entra and Agent 365, “has already reached millions of paid seats”, and that “Copilot revenuegrowth accelerated quarter-over-quarter with continued adoption across M365, GitHub, and security.”
How Microsoft described the two ways customers pay for Copilot on its FY27 Q1 earnings call, with the figures it gave for each. Sources: Microsoft FY27 Q1 earnings call (official prepared remarks), Microsoft Form 10-Q for the quarter to 30 September 2026.
GitHub Went First
The usage meter is furthest along in coding. Nadella said “Credit consumption from agentic features on GitHub has more than doubled since usage-based billing went into effect” and that “Agent generated PRs have increased 6X over the past six months.”
Stifel’s Brad Reback asked on the call whether consumption would spread to core Microsoft 365 customers as it had on GitHub. Nadella answered, per the machine transcript, that on the coding side “it will be faster just because I think people are used to paying on this pay go”. Hood added that “it will be a slower move outside of coding”.
Nadella also said, per the same transcript: “We don’t want them to overbuy one thing and then feel like they’re token maxing because that doesn’t serve anybody’s purpose.”
What the Seat Numbers Show
Microsoft’s 10-Q for the quarter says Microsoft 365 commercial cloudrevenue increased 17% “driven by higher revenue per user, reflecting continued upsell to premium seat offerings, including Microsoft 365 Copilot, E5, and E7, as well as increased consumption of usage-based services, primarily in GitHub Copilot”. It says Microsoft 365 commercial seats grew 5%, under a metric that now includes paid GitHub seats.
Hood said paid seats grew 5% “with some impact from the weaker sales execution noted earlier”, referring to “weaker sales execution in our M365 E3 and standalone SKUs”. For the December quarter she said growth “will be driven primarily by ARPU, with additional contribution from seats.”
The last seat total Microsoft gave came in Nadella’s annual shareholder letter, published on 21 October: Microsoft 365 Copilot “reached over 30 million paid seats” in the fiscal year to June 2026.
Our Count of the Metrics
By our count of Nadella’s official prepared remarks on Copilot and GitHub, he gave five usage or consumption growth figures. They are: automated tasks nearly doubled since July, daily users up nearly 50% in the quarter, customers consuming credits up over 75%, agent-generated pull requests up 6X in six months, and GitHub agentic credit consumption more than doubled. He gave one seat figure, the count of customers with more than 50,000 seats, and no total seat count.
As we read the call, Microsoft now describes Copilot as a product with two meters: a per-seat subscription that, in Nadella’s words, IT typically funds, and a consumption meter for agent work that business units fund.
The figures Microsoft chose to give follow that split. The seat figure it gave is about large deployments, customers with more than 50,000 Copilot seats, while the growth figures for everyday activity are usage and credit consumption.
Hood’s guidance points the same way: she said December-quarter Microsoft 365 commercial cloudgrowth will be driven primarily by ARPU, with additional contribution from seats.
Satya Nadella, Microsoft FY27 Q1 earnings call, 28 October 2026
“Our business model is expanding from per-seat subscriptions to include consumption, expanding our TAM and ARPU.”
Three Implications
FOR SEATS Paid Microsoft 365 commercial seats grew 5%, and Hood said that included some impact from weaker sales execution in E3 and standalone SKUs.
FOR USAGE Copilot customers consuming credits through usage-based billing grew over 75% in the quarter, and GitHub agentic credit consumption more than doubled since usage-based billing began, according to Nadella.
FOR DISCLOSURE Microsoft gave no updated Copilot seat count this quarter; the last, in Nadella’s 21 October letter, was over 30 million paid seats.
The framework argues: “SaaS is charged for access to tools. AGaaS charges for the execution of outcomes.”
Microsoft’s call describes both meters running side by side rather than one replacing the other. The framework was published in March 2026 and does not discuss these figures.
What Is Not Established
Microsoft does not disclose consumption revenue or the number of customers paying through usage-based billing; the 75% is a growth rate, not a count. It gave no updated Copilot seat count this quarter, the last being over 30 million paid seats in the fiscal year to June 2026. The prepared-remarks quotes come from Microsoft’s official transcript; the question-and-answer quotes come from a machine transcript of the webcast, because the official document covers prepared remarks only.
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Microsoft said Copilot customers consuming credits through usage-based billing grew over 75% in the quarter, customers with more than 50,000 Copilot seats rose over 8X in a year, and paid Microsoft 365 commercial seats grew 5%. It gave no updated Copilot seat count, and Hood said December-quarter growth will come primarily from ARPU.
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A note on sourcing. Prepared-remarks quotes come from Microsoft’s official FY27 Q1 earnings call transcript; question-and-answer quotes come from a machine transcript of Microsoft’s webcast, as the official document covers prepared remarks only. Seat and revenue figures come from Microsoft’s 10-Q for the quarter to 30 September 2026 and Nadella’s 21 October shareholder letter. Counts and differences are our own; linked earlier pieces carry their own sources.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
