Microsoft delivered a strong earnings report on Wednesday with $81.3 billion in revenue for the quarter (up 17%), net income of $38.3 billion (up 21%) and a record breaking Microsoft cloud revenue of over $50 billion.

But the stock tumbled Thursday as investors worried about how much the tech giant spent to build its cloud and questioned whether the investment would pay off. Microsoft CEO Satya Nadella says, yes — and spent much of the earnings call trying to make that point.

Microsoft spent nearly as much on capital expenditures in the first half of its current fiscal year as it did in all of last year. And the numbers are huge: Microsoft funded $88.2 billion in capital expenditures last year, and has spent $72.4 billion so far this year.

Most of the spending is on AI services to enterprises and large AI labs, especially OpenAI as well as the Anthropic. The big question on the minds of investors is: can the investment be more efficient, and ultimately profitable?

Investors fear that Microsoft’s main business cloud products, Azure, and its Microsoft 365 apps, are not growing as fast as they would like.

“The fact that BOTH Azure and M365 shares fell relatively short was the key negative we heard,” Wall Street analyst for UBS, Karl Keirstead, wrote in a research note on Thursday. (Keirstead isn’t worried about this, and recommends buying the stock.)

However, a few months later, news spread that people don’t really want to use Microsoft’s AI, despite Copilot being woven into all kinds of Microsoft products, anywhere.

Nadella spent much of his time during the earnings call engaging in what is best described as the use of AI in PR. Despite his pitch, some of the numbers he gave were a little squishy.

For example, Nadella said that daily consumer users of Copilot AI products are growing “almost 3x per year.” This refers to AI chats, the news feed, search, browsing, shopping and “operating system integrations.”

How many actual users that represents, he did not say. (We reached out to Microsoft and asked.)

Last year, in its annual report the company says it has surpassed 100 million monthly active Copilot users, but counts commercial users and consumers.

He’s ahead of Microsoft’s coding AI, GitHub Copilot, which says it now has 4.7 million paid subscribers, up 75% year-over-year. It seems like a healthy business. Last year, in its annual report, Microsoft said that GitHub Copilot had 20 million users, a number that includes those who opted for the free level.

He added that Microsoft 365 Copilot currently has 15 million paid seats from companies that purchase it for their employees. This is from a base of 450 million paid seats, the company said.

And Nadella called the growth of Dragon Copilot Microsoft’s health AI agent for medical professionals (a competitor to super hot startup Harvey). He said that this product is available to 100,000 medical providers and is used to document 21 million patient encounters in the quarter, which triples every year.

Is spending billions on a data center worth it? Apparently, Nadella thinks so. He and CFO Amy Hood said on the earnings call that the demand for AI services in products is greater than the supply in the data center, so all new equipment is essentially booked at capacity for its life.