Aaron Holmes

Two months after ending its partnership with OpenAI, Microsoft is using its Build developer conference to showcase homegrown AI models designed to compete with offerings from OpenAI and Anthropic. The move signals Microsoft's shift toward AI independence and reduces reliance on external AI providers. The conference will serve as a public debut for Microsoft's internal AI development efforts.

Microsoft will unveil a new coding model and suite of specialized AI models at its Build conference next week, aiming to regain ground in the AI coding assistant market where GitHub Copilot has lost share to competitors like Cursor and Claude Code. The company plans to announce models optimized for transcription, reasoning, speech, and image tasks, building on homegrown models previewed earlier this year. The move signals Microsoft's effort to compete more directly with rivals in the rapidly evolving developer tools space.

Enterprise software customers are gaining negotiating leverage by demanding AI capabilities as contract conditions and shorter agreement terms. Companies like National Life Group have secured opt-out provisions allowing early exit if vendors fail to deliver promised AI features at expected pace. Intuit is shifting to consumption-based pricing for new AI features, joining other enterprise software firms adapting to the high costs of powering AI applications.

Microsoft is leveraging its roughly 100,000 internal software engineers as a source of proprietary training data to revitalize GitHub Copilot's competitive position in AI coding tools. The company plans to use code written by its own developers to train improved coding models, a strategy that reflects broader industry practice among major AI labs. This move comes as GitHub Copilot has lost ground to competitors like Anthropic and Cursor, and signals Microsoft's confidence that internal data assets can help close the gap.

Microsoft executives, including Jay Parikh who oversees GitHub, have privately warned that the code repository and its Copilot AI assistant face a critical competitive threat. While the AI boom initially boosted GitHub's usage and revenue, the service has struggled to keep pace with newer AI coding competitors that have since surpassed it. The division has also been hampered by frequent and major outages that have frustrated large customers and prompted Microsoft to issue public apologies.

Bill Ackman's Pershing Square has built a stake in Microsoft, with Ackman arguing on X that the company's roughly 15% year-to-date stock decline reflects investor underestimation of Office 365's resilience and the growth potential of its Copilot AI offerings. The move signals confidence in Microsoft's ability to monetize its AI investments despite near-term market skepticism. Ackman's position represents a high-profile bet that the market has overshot in pricing out Microsoft's enterprise software moat and emerging AI revenue streams.

Researchers at the U.K.'s AI Security Institute reported Wednesday that Anthropic's latest version of Mythos AI demonstrates significantly improved capability at discovering and exploiting previously unknown software vulnerabilities compared to earlier iterations of the model. The findings highlight a notable capability jump in the model's ability to identify and weaponize zero-day exploits. Anthropic has not yet released Mythos widely to the public, limiting independent verification of the claims. The research underscores growing concerns about the dual-use potential of advanced AI systems in cybersecurity contexts.

Microsoft executive Michael Wetter testified in court that the company will have spent more than $100 billion on commercial agreements with OpenAI by the end of Microsoft's fiscal year in June 2026. This figure includes the $13 billion Microsoft invested directly in OpenAI as well as costs associated with building infrastructure to support the partnership. The disclosure emerged during court testimony and underscores the scale of Microsoft's financial commitment to securing access to OpenAI's technology and capabilities.

OpenAI has renegotiated its revenue-sharing agreement with Microsoft, significantly reducing its financial obligations through 2030. Under the original deal, OpenAI would have owed Microsoft up to $135 billion if it hit long-term revenue targets, with a 20% revenue share. The new undisclosed terms substantially lower this amount, easing pressure on OpenAI's finances as it scales.

Hedge fund TCI Fund Management cut nearly its entire $8 billion stake in Microsoft, citing concerns about the company's competitive position as AI threatens to displace existing software products. CEO Christopher Hohn flagged uncertainty over Microsoft's future in an investor letter, signaling investor worry that the company's traditional software business faces disruption from AI. The move marks a significant vote of no confidence from a major institutional investor and reflects broader market anxiety about how established tech giants will fare in an AI-driven landscape.

Microsoft is scaling back its aggressive Copilot rollout across its product portfolio after customer pushback over unnecessary or intrusive AI features. The company had rapidly deployed Copilot-branded chatbots across Office, Bing, PowerBI, Dynamics, and gaming products following its access deal with OpenAI. This week, newly appointed Xbox CEO Asha Sharma announced the shutdown of Gaming Copilot, signaling a broader retreat from what had become perceived as feature bloat.

The U.S. National Security Agency is using Anthropic's Mythos model to identify security vulnerabilities in Microsoft software, according to Bloomberg reporting. The NSA's cyber intelligence mission centers on discovering and potentially exploiting security flaws in widely deployed computer systems, and Microsoft's dominant market position makes its software a natural focus. This represents a concrete government use case for advanced AI models in vulnerability research and cybersecurity.

Microsoft reported first-quarter revenue growth of 18% to $82.9 billion, up 1 percentage point from the prior quarter, driven by accelerating growth in Azure cloud and Office 365 commercial businesses. Office 365 Copilot sales rose 33%, indicating strong enterprise adoption of the company's AI-integrated productivity tools. The acceleration signals sustained demand for both cloud infrastructure and AI-enhanced software, though the article provides limited detail on the drivers beyond general demand attribution.

Microsoft and OpenAI have amended their commercial arrangement to allow OpenAI to sell its models through competing cloud providers, ending Microsoft's exclusive distribution rights. The companies also removed a contentious revenue-sharing clause that would have given Microsoft a cut of OpenAI's earnings and certain governance rights. The shift signals a recalibration of one of AI's most closely watched partnerships and reflects OpenAI's push for broader market access.

Enterprise software companies are abandoning flat per-user subscription fees in favor of usage-based pricing tied to AI consumption. By end of 2025, 79 of the 500 largest software firms tracked by analyst Kyle Poyar, including HubSpot, Adobe, and Salesforce, had implemented additional charges based on AI usage, more than doubling the count from 2024. This shift reflects how AI capabilities are disrupting traditional seat-based licensing models that no longer capture the value these tools generate.

Cohere, a Canadian AI lab, is acquiring German AI firm Aleph Alpha for an undisclosed price. Schwarz Group, a major backer of Aleph Alpha, will simultaneously invest $600 million in Cohere's Series E funding round. The deal consolidates European AI talent and resources under Cohere's umbrella while securing significant capital from a German industrial conglomerate.

Microsoft's GitHub is restricting usage of its Copilot AI coding tool and pausing new individual account sign-ups due to surging demand that has caused platform outages. The company is lowering usage caps for all but its most expensive tier, effectively implementing a soft paywall to manage traffic. This move reflects the strain that rapid AI adoption is placing on infrastructure and signals that GitHub is prioritizing revenue and stability over user growth.

Microsoft's enterprise AI push has struggled with low adoption of 365 Copilot, which reached only 3% of Office 365 users by year-end 2025. However, a lesser-known AI agent product launched by LinkedIn in fall 2024 has unexpectedly gained significant traction, drawing attention from leadership across Microsoft's broader organization. The success suggests that niche, specialized AI tools may find faster market acceptance than broad productivity integrations.