Databricks deepens Microsoft tie-up into the 2030s

Databricks and Microsoft have expanded their partnership into the 2030s, focusing on enterprise AI built on companies' own business data.

The agreement extends a relationship that has run for nearly a decade. Under the expanded arrangement, Databricks will increase its use of Microsoft's Azure cloud services for internal operations and analytics, while Microsoft will continue embedding Databricks tools across parts of its software portfolio.

Databricks will run core business operations and analytics on Azure Databricks, the joint service offered through Microsoft's cloud platform. It is also building its unified lakehouse on the service, in a move meant to show customers it uses the platform for large-scale internal workloads.

Another part of the deal covers broader use of Azure Cobalt, Microsoft's Arm-based infrastructure. Databricks said it already uses Cobalt 100 and plans to adopt Cobalt 200, which Microsoft says delivers up to 50% better performance and includes memory encryption by default.

The companies are also extending integration of Databricks' AI software within Microsoft products. That includes Genie, which Databricks describes as its AI co-worker, and Unity AI Gateway, used to govern models, agents and spending.

Microsoft's broader software estate cited in the announcement includes Microsoft 365, Teams, Copilot, Power BI, Power Platform, Microsoft Entra, Microsoft Purview, Azure Data Lake Storage and Microsoft OneLake. The goal is to place Databricks data and AI functions inside the software environments where customers already manage work, analytics and security.

The partnership reflects a wider market shift as large software and cloud providers compete to make generative AI systems more useful for businesses by tying them to internal company data. Many businesses have moved beyond early experimentation, but questions remain over cost, governance and how to connect AI tools to trusted operational information.

Internal use

Databricks' decision to use Azure Databricks for its own operations is likely to be watched closely by customers seeking evidence of production use at scale. Software suppliers increasingly try to reassure large organisations by showing that the products they sell are also used internally for finance, operations and analytics.

Thousands of customers already use Azure Databricks for critical workloads and AI projects, according to Databricks. Examples in the announcement included Alinta Energy, Bupa, Fonterra, Banco Bradesco, the Cincinnati Reds, Electrolux, SMBC and Unilever.

For Microsoft, the extended tie-up also supports its effort to keep Azure at the centre of enterprise AI spending. Competition among cloud providers has intensified as customers decide where to run data platforms, train models, deploy AI agents and manage security controls.

AI governance

Governance was a recurring theme in the announcement. As companies roll out AI systems more widely, they are under pressure to track how models are used, what data those systems can access and how spending is managed across multiple departments and applications.

Databricks and Microsoft said their deeper integration is designed to address that challenge by linking business data, identity controls and AI tooling more closely. In practice, that means giving customers ways to connect agents and models to internal datasets while managing access through existing Microsoft and Databricks systems.

Ali Ghodsi, Co-founder and Chief Executive Officer of Databricks, described the partnership as a response to those demands. "For nearly a decade, Databricks and Microsoft have helped enterprises innovate with data and AI," said Ghodsi. "Today, our partnership is stronger than ever. 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. This lets customers get the full benefits of agents and models while controlling costs and ensuring governance."

Judson Althoff, Executive Vice President and Chief Commercial Officer at Microsoft, said the next phase of AI adoption would depend on how well organisations use their own information. "The next generation of AI will be defined by how effectively organisations turn their unique knowledge into intelligence," said Althoff. "Microsoft and Databricks are helping customers connect data, AI, and business context to accelerate decision-making and drive measurable impact. With Databricks deepening its investment in Azure Databricks and Azure Cobalt-powered infrastructure, customers will benefit from greater performance, efficiency, and scale for their most demanding workloads. Databricks' decision to run its own core business operations on Azure Databricks also gives customers confidence in a platform proven at enterprise scale."