Amid all the recent hubbub over AI coding startups, the company that invented the category — Microsoft— is notably missing from the conversation. But its next moves could shake up a high-stakes competition that’s still in its early stages.
Microsoft’s groundbreaking GitHub Copilot coding tool was all the rage when it was released in 2021, but over the past year it’s been overtaken by startups and the advent of “vibe coding,” which enables even noncoders to create programs from natural language prompts.
Inside Microsoft, CEO Satya Nadella has grown concerned. In the last month he’s made beating breakout star Cursor a top priority and has put enormous pressure on the GitHub team, according to a person briefed on the situation.
Microsoft acquired GitHub in 2018 and mostly let it operate independently, but they’ve been chiseling away at that autonomy. Among the execs who have been taking tighter reins at GitHub recently includes Jay Parikh, a senior member of Nadella’s team who leads the CoreAI platforms and tools group, this person said.
Microsoft’s history of fumbling its leads in new areas but ultimately recovering thanks to its stranglehold on the enterprise software market is essentially the history of the company itself. That could be more difficult in the coding space, where the customers are finicky and sophisticated software developers are happy to jump to whatever product works best for them.
At the same time, the AI coding startups face a tricky path, with intensifying competition from both the tech giants and the foundation model companies that power their apps. Coding app startup Windsurf’s deal with Google showed that even a growing business in a hot category lacked confidence in its market position. Cursor depends on Anthropic’s models, a big vulnerability given Anthropic’s own ambitions in the coding application space.
Two of the top developers of the Anthropic coding app recently jumped ship to Cursor — only to return to Anthropic weeks later. It was a telling moment about where the talent in the space is placing their bets.
At GitHub, a core frustration among the rank and file is that Microsoft executives have been giving mixed messaging on whether to focus on increasing the reach of Copilot, or making money. In the past GitHub Copilot has absorbed losses in its efforts to get more users, but Microsoft has been increasingly margin conscious of late, as multiple rounds of layoffs have made clear.
Microsoft’s numbers are nothing to be ashamed of, on the face of it. In its April earnings call, Nadella boasted that GitHub Copilot has 15 million users globally, four times more than a year ago. That’s well above the one million users that Cursor reported in early March.