Microsoft (MSFT) and Databricks have announced a major extension of their strategic partnership, locking in collaboration through the 2030s. The agreement deepens technical integration across both companies' product stacks and includes a significant hardware commitment from Databricks to Microsoft's custom silicon platform. MSFT shares were down 2.73% on Wednesday at the time of the announcement.

Under the expanded deal, Databricks will run its own core business operations and analytics on Azure Databricks, the jointly developed Databricks service available on Microsoft's cloud platform. The company will also increase its use of Azure Cobalt, Microsoft's custom Arm-based chip platform. Databricks currently uses Azure Cobalt 100 and plans to transition to Cobalt 200, which Microsoft says delivers up to 50% better performance and includes memory encryption enabled by default.

Microsoft will deepen integrations of the Databricks platform across its broader product stack, including Microsoft 365, Teams, Copilot, Power BI, Microsoft Purview, and Microsoft Foundry. The integrations place Databricks' data and AI tools closer to the applications many enterprise customers already use for collaboration, analytics, governance, and AI development.

AI Tools Embedded Into Microsoft Workflows

Databricks' Genie AI tool and Unity AI Gateway will be integrated directly into Microsoft customer workflows. Genie is a conversational analytics tool that enables users to query data using plain language.

"With Databricks Genie and Unity AI Gateway deeply integrated across Microsoft's products, we're helping enterprises unify their data and ground AI in business knowledge," said Ali Ghodsi, co-founder and CEO of Databricks.

Judson Althoff, CEO of Microsoft Commercial Business, said Databricks' decision to run its own operations on Azure Databricks "gives customers confidence in a platform proven at enterprise scale." Althoff added that the partnership will help customers achieve "greater performance, efficiency, and scale for their most demanding workloads" through Azure Cobalt-powered infrastructure.

Thousands of joint customers already use Azure Databricks. Named customers include Banco Bradesco, Electrolux, SMBC, and Unilever. The partnership is also notable because cloud providers and data-platform companies are competing to make enterprise data more usable for generative AI systems, where governance, performance, and integration with existing business software are central buying considerations.

Databricks Valued at $188 Billion

Databricks' platform is used by more than 20,000 organizations globally, including 70% of Fortune 500 companies. The San Francisco-based firm remains one of the most valuable private companies in the world.

Last week, Databricks signed off on a funding round valuing the company at $188 billion. That round is expected to close later this summer.