Microsoft has quietly built a booming AI business in China, with ByteDance emerging as its largest AI customer. The Beijing-based parent of TikTok is on track to spend over $1 billion annually on Azure AI and cloud services, according to people familiar with the matter. Other major Chinese tech firms—Ant Group, Meituan, and Tencent—are also significant spenders on AI models via Microsoft's Azure platform.
Internal sales figures reveal Azure AI revenue in China tripled in the fiscal year ending June 2025, following a 400% surge the year before. Judson Althoff, then-Chief Commercial Officer, told employees in July 2025: "The world's most elite AI solutions are being built on the western coast of the United States and the eastern coast of China. The one company bringing those two places together is Microsoft."
While OpenAI and Anthropic refuse to sell their models directly to Chinese companies over intellectual property and national security concerns, Microsoft leverages its unique partnership with OpenAI to set its own policies. Chinese customers access GPT models remotely from data centers in Singapore, with automated monitoring to prevent misuse. Microsoft only sells to established companies, not individual developers, and asserts it complies with local regulations. However, OpenAI has privately raised concerns about Chinese firms using model distillation to train competing systems.
Despite the rapid growth, China represented just 1.5% of Microsoft's total 2024 revenue, per company President Brad Smith. Much of the spending supports international operations rather than domestic use, and all named Chinese companies also develop their own AI models independently. Meanwhile, Microsoft is testing DeepSeek-V4 as a cheaper alternative for its Copilot Cowork enterprise agent, as many U.S. developers switch to cost-efficient Chinese AI models.
