Microsoft (MSFT) is quietly running a fast-growing AI business in China — and some of the biggest names in Chinese tech are footing the bill.
ByteDance, the Beijing-based parent of TikTok, has been Microsoft’s largest AI customer in China in recent years. The company is on track to spend more than $1 billion annually on Microsoft’s Azure AI and cloud services, according to people familiar with the matter cited in a Bloomberg report.
Ant Group, Meituan (MPNGF), and Tencent Holdings (TCEHY) are also among the top spenders on AI models through Microsoft’s Azure cloud platform.
The numbers behind the business are striking. Then-Chief Commercial Officer Judson Althoff told employees at an internal sales meeting in July 2025 that Azure AI revenue in China had tripled during the fiscal year ending June 2025 — and had surged 400% the year before that.
“The world’s most elite AI solutions are being built on the western coast of the United States and the eastern coast of China,” Althoff said at the time. “The one company bringing those two places together is Microsoft.”
OpenAI and Anthropic both decline to sell their models directly to Chinese companies, citing concerns over intellectual property theft and national security risks.
Microsoft takes a different approach. Under its unique partnership with OpenAI, it sets its own policies on selling models — including the GPT series — in China. It markets those tools to established Chinese companies for use cases ranging from software development to customer service automation.
Microsoft does not host the models inside China. Customers access them remotely over the internet from facilities in countries like Singapore, a safeguard against IP theft concerns.
The company employs automated monitoring to prevent customers from using models to build competing products. In China, it only sells to established companies, not individual developers, in line with local regulations.
Still, customers in China are not subject to any heightened usage monitoring. OpenAI has privately raised concerns with Microsoft about Chinese firms using its models for “distillation” — a process of training competing models using outputs from existing ones.
Despite the rapid growth, China remains a relatively small part of Microsoft’s overall business.
Microsoft President Brad Smith told Congress that China accounted for roughly 1.5% of total company revenue in 2024.
Much of what Chinese tech firms spend on Azure reportedly goes toward supporting their international operations rather than domestic usage. All of the named companies — ByteDance, Tencent, Meituan, and Ant Group — develop their own AI models independently.
ByteDance runs a widely used AI chatbot in China called Doubao. Ant Group said its core products do not rely on external AI models.
Microsoft teams based in Asia manage the ByteDance relationship. To operate in China, Microsoft partners with local providers and runs data center regions near Beijing and Shanghai — though model hosting itself stays outside the country.
Microsoft, OpenAI, and ByteDance all declined or did not respond to requests for comment.
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