Microsoft just got a $1.1 billion boost from Coca-Cola

Fast Facts

• Coca-Cola on Tuesday announced another five-year partnership with Microsoft. 
• Coca-Cola has agreed to a $1.1 billion commitment to Microsoft Cloud as part of the partnership. 
• The two companies previously announced a similar partnership in 2020. 

Coca-Cola  (KO)  and Microsoft  (MSFT) on April 23 announced another five-year partnership designed to allow the soft drink giant to further explore, experiment with and integrate Microsoft's enterprise tech offerings. 

Coca-Cola has agreed to commit $1.1 billion to Microsoft Cloud as part of the partnership, according to a statement. 

Coca-Cola — which has already moved all of its applications to Microsoft Azure — said it will continue to experiment with OpenAI's generative artificial intelligence technology. The company said specifically that these experiments will include testing how "Copilot for Microsft 365 could help improve workplace productivity." 

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Coca-Cola did not immediately respond to a request for comment regarding its specific plans for AI-enabled productivity enhancements, and whether the company plans to leverage AI in order to trim its staff. 

This latest partnership follows a similar partnership, announced in 2020, that was designed to supercharge Coca-Cola's operations through Microsoft's cloud technology. The 2020 agreement came with a $250 million commitment. 

“Our expanded partnership with Microsoft is an important next chapter in Coca-Cola’s journey toward a digital-first enterprise powered by emerging technologies,” Neeraj Tolmare, senior vice president and global chief information officer for Coca-Cola, said in a statement. “Microsoft’s capabilities help accelerate our adoption of AI to create incremental enterprise value.”

Shares of Coca-Cola dipped slightly Tuesday morning. 

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The AI hallucination 

This latest promise to explore and integrate ever more generative AI comes as the hype that has become so entwined within the sector is beginning to crumble. 

AI applications are enormously expensive to build, and they have yet to generate returns anywhere near large enough to match. What many of these AI-focused companies have accomplished thus far are instead valuations that are many times forward company earnings. 

AI researcher and cognitive scientist Gary Marcus said recently that the core reality of hallucinations — when an AI model's output is confidently incorrect — make current AI systems generally unreliable, especially for enterprise use cases. 

And if a system is unreliable, he said, it's unusable. And if it's unusable, the revenue won't follow. 

"The entire industry is based on hype," Marcus said. 

Coca-Cola did not immediately respond to a request for comment regarding the reliability of the systems it has experimented with so far. 

Wedbush tech analyst Dan Ives said in an April 23 note that AI and the cloud have supercharged Microsoft's growth trajectory. He said that the stock has yet to fully price in this coming wave of cloud and AI growth that's building at Microsoft. 

Microsoft will report earnings after the bell Thursday. 

Shares of Microsoft, up 8% for the year, rose 1.4% Tuesday morning. 

Contact Ian with tips and AI stories via email, [email protected], or Signal 732-804-1223.