How Did Microsoft Fumble the AI Ball So Badly?
A client of mine who runs an AI consultancy asked if I could do any Copilot consulting for a client. (Not GitHub Copilot, mind you. Microsoft’s Copilot products. As if the branding couldn’t be more confusing.)
I asked them if they were looking for AI strategy overall, or if it was a case of “some exec bought Copilot, now we need to make Copilot work because Boss Said So”.
Of course it was the latter.
My response was: I’ve heard that Copilot was a bad product, and I haven’t invested time or effort into trying to use it. Not to mention there are about 100 different “Copilot” things. What am I supposed to be focused on? Copilot for Office? Copilot Studio? Copilot for Windows? Copilot for Security?
The big bet I made early was that learning AI primitives was the best path forward, and that was 100% the right call.
My question is: other than Azure OpenAI (which is still a product with lots of shortcomings like slow thinking models, incomplete Responses API, etc.), how has Microsoft fumbled the ball so badly?
Google seemed so far behind when they launched Bard, and yet Gemini keeps getting better. It’s a first-party model, unlike Microsoft’s marriage to OpenAI.
It’s looking more and more like OpenAI has come out farther ahead in their deal with Microsoft.
The Numbers Don’t Lie
Windows Central reported that Microsoft reduced sales targets across several divisions because enterprise adoption is lagging.
The adoption numbers are brutal. As of August 2025, Microsoft has around 8 million active licensed users of Microsoft 365 Copilot. That’s a 1.81% conversion rate across 440 million Microsoft 365 subscribers. Less than 2% adoption in almost 2 years.
Tim Crawford, a former IT exec who now advises CIOs, told CNBC: “Am I getting $30 of value per user per month out of it? The short answer is no, and that’s what’s been holding further adoption back.”
Even worse: Bloomberg reports that Microsoft’s enterprise customers are ignoring Copilot and preferring ChatGPT instead. Amgen bought Copilot for 20,000 employees, and thirteen months later their employees are using ChatGPT. Their SVP said “OpenAI has done a tremendous job making their product fun to use.”
The OpenAI Dependency Problem
Microsoft bet the farm on OpenAI. Every Copilot product runs on OpenAI models. But they don’t control the roadmap. They don’t control the pace of improvement. They’re a reseller with extra steps.
Compare this to Google. Gemini is a first-party model. Google controls the training, the infrastructure, the integration. When they want to ship a new capability, they ship it. No waiting on a partner. No coordination overhead.
Microsoft sprinted out of the gate like a bull in a china shop - they looked like they had a huge advantage when married to OpenAI. Fast forward to late 2025, and Google’s AI products simply work better and feel more in-tune with how people actually use them.
I’m not saying Microsoft can’t turn this around. But right now, they’re losing to a competitor they were supposed to have lapped, and they’re losing on products built with technology they’re supposed to own.
That’s a fumble.