How Microsoft built a massive AI business in China
What's the story
Despite the US-China rivalry in artificial intelligence (AI), Microsoft has made a major business out of selling AI models to Chinese companies. ByteDance, China's social media and AI giant, has generally been Microsoft's biggest AI customer in recent years. The Beijing-based company is expected to spend over $1 billion annually on Microsoft's AI and cloud services, according to Bloomberg.
Tech investments
Other Chinese companies consuming Microsoft's AI models
Along with ByteDance, other Chinese tech giants like Ant Group, Meituan, and Tencent are also big consumers of AI models via Microsoft's Azure cloud service. Despite the controversy surrounding its China business, which only accounted for about 1.5% of overall revenue in 2024, Microsoft sees value in having a presence there to stay updated on local innovations and serve multinational customers.
Rapid expansion
Azure's AI revenue growth in China
Despite fears of intellectual property theft or misuse, Microsoft has seen rapid AI growth in China. In a July 2025 internal sales meeting, then Chief Commercial Officer Judson Althoff said Azure's AI revenue was growing faster in China than anywhere else. It tripled in the fiscal year ending June 2025 and surged by 400% the year before.
Strategic alliance
What AI models does Microsoft sell in China?
Microsoft's unique partnership with OpenAI gives it the authority to set its own policies on selling models like the GPT series in China. The company sells a range of other AI models there, except for some like Anthropic's. These are marketed to customers for various purposes, from software development to customer service automation.
Safeguards
OpenAI's complaint against Microsoft
OpenAI has privately complained to Microsoft about its alleged inaction against Chinese companies copying its models, a process called "distillation." However, Microsoft uses automated monitoring to stop customers from using AI models for building competing products. In China, the company sells AI models only to established companies and not individual developers, following local regulations.