BENGALURU, Jan 30, 2026, 19:09 IST
Perplexity, an AI search startup, has struck a $750 million deal with Microsoft for three years of Azure cloud services, Bloomberg News reported Thursday, citing insiders. The agreement allows Nvidia-backed Perplexity to operate various AI models under Microsoft’s Foundry program. (Reuters)
The timing says a lot. Microsoft is investing heavily in AI data centers and chips, but company leaders are already warning about hitting capacity limits amid soaring demand. “We want to be able to allocate capacity while we’re supply constrained,” CEO Satya Nadella said this week. CFO Amy Hood also noted that increasing memory-chip prices will pressure cloud margins down the line. (Reuters)
Wall Street’s patience is running thin with big AI spending that isn’t translating quickly into growth. Microsoft’s shares plunged 10% after their latest earnings, wiping out over $350 billion in market value. Meanwhile, investors favored Meta, rewarding its stronger growth story, Reuters reported. “The market appears to be questioning whether these massive capital expenditure hikes will generate sufficient returns,” noted Jesse Cohen, a senior analyst at Investing.com. (Reuters)
Microsoft confirmed its partnership with Perplexity but declined to disclose the financial terms. “Perplexity has chosen Microsoft Foundry as its primary AI platform for model sourcing under a new multi-year agreement,” a Microsoft spokesperson told Reuters, as reported. Meanwhile, a Perplexity representative told Bloomberg they’re teaming up with Microsoft “for access to frontier models from X, OpenAI and Anthropic.” Perplexity did not respond to Reuters’ request for comment. (MarketScreener)
Foundry acts as a gateway for developers to access various AI models and run them on Microsoft’s cloud, avoiding lock-in with a single provider. In industry jargon, “frontier models” refers to the latest, most advanced systems.
Perplexity’s latest move isn’t without controversy. Last year, Amazon sued the startup over an “agentic” shopping feature—automation tools that perform tasks like placing orders on behalf of users. Amazon alleged Perplexity secretly accessed customer accounts and disguised automated actions as human browsing. Perplexity countered, saying credentials remain stored locally and never leave users’ devices, labeling Amazon’s lawsuit as “bullying” in a blog post. (Reuters)
Microsoft is facing tough market conditions. Its shares dropped 6.2% in Frankfurt on Thursday, following the company’s report of record AI investments paired with slower cloud growth, which unsettled investors. (Reuters)
The fine print will reveal if this is a genuine shift or just an expensive safeguard. S&P Capital IQ pointed out that the short-term value hinges on model access within Foundry—whether certain models are widely available or locked behind preview—and which regions support “pay-per-token” billing, charging for each unit of text processed. They also cautioned that running AI workloads across both AWS and Azure could rack up hefty “data egress” fees, the costs for transferring data between clouds, while complicating the network setup. (MarketScreener)
At this stage, it’s less about a straightforward migration and more about Perplexity hedging its bets. Investors are keen to see if its spending shifts noticeably toward Azure—and whether Microsoft can leverage deals like this into consistent cloud growth instead of just driving up costs.
