Microsoft’s AI Efforts Are Faceplanting
Microsoft has continued to focus more and more on AI — almost certainly at the expense of its core products, like the Windows operating system. And unfortunately for the Redmond giant, the gambit doesn’t seem to be paying off.
Current and former employees tell The Wall Street Journal in new reporting that the company’s confusing branding and grating lack of cohesion between its products has frustrated and turned off users. And data reviewed by the newspaper shows that a vanishingly small percentage of its enterprise customers prefer using its AI chatbot and assistant Copilot, which appears to be losing ground to its competitors at Google, OpenAI, and Anthropic.
The report comes after a historically miserable day at the stock market for Microsoft last week, which saw its share price collapse by nearly 12 percent, a sign of investor doubts over CEO Satya Nadella’s AI-first vision and the company’s exorbitant spending in its pursuit.
Microsoft is certainly giving OpenAI a run for its money in the bad-branding department. It has multiple versions of Copilot woven across its different services and software — too many versions, you might argue. Do you need Microsoft 365 Copilot, or Microsoft 365 Copilot Chat? What about just plain old Microsoft Copilot, or Microsoft Copilot Studio? If you’re more nerdy, you might prefer Github Copilot or Microsoft Security Copilot. These, of course, shouldn’t be confused with its older offerings like Microsoft Copilot Pro, or Copilot+ for PCs. Hey, maybe those employees had a point!
The gist is that Copilots are divided into different groups for different customers: one for general consumers, one for programmers and developers, and an enterprise Copilot for companies and professionals.
Nonetheless, because it’s Microsoft, it can still bring in a large user base even if it’s dual-wielding pistols to shoot itself in the foot. Last week, it reported that it had sold 15 million Microsoft 365 Copilot “seats” or annual users, out of 450 million Microsoft 365 business subscribers over all.
But that user base is starting to be ebbed away, according to previously unreported data from the market research firm Recon Analytics. Its survey of more than 150,000 US customers cited by the WSJ showed that from July 2025 to this January, the share of Copilot subscribers — as in paying customers — who preferred using it as their primary chatbot plummeted from 18.8 percent to 11.5 percent. Meanwhile, the share of people who used Google’s Gemini nudged upward from 12.8 percent to 15.7 percent.
A note by analysts at Citi Research provides another brutal statistic: some companies are only using about 10 percent of the Copilot subscription “seats” they paid for, per WSJ’s reporting. Customers complained that the Copilot versions were confusing, that that they didn’t like having Copilot forced on them, and that its different AI models didn’t integrate with each other well. If you wanted to take something you were working on with your workplace AI and continue working on with your consumer AI model, the experience would be frustrating and clumsy.
(Without providing specifics, a Microsoft spokesperson pushed back against the WSJ‘s reporting, saying that the “pace of growth that we’re seeing is unlike anything we’ve seen before.)
One place that Copilot does seem to be taking off? Microsoft. Chief AI transformation officer — which we assure you is a real job title — Pam Maynard told the WSJ that the adoption rate within Microsoft’s sales organization has shot up from 20 percent to over 70 percent in the past year. Maynard attributes this to employees being more comfortable with AI, but it’s also clear that the company’s leadership has heavily pushed embracing the tech, with employees being asked to quantify how they’re using tools like Copilot at work, people familiar with the matter told the WSJ. (CEO Satya Nadella has previously boasted that over a quarter of the company’s code is written with AI.)
The survey findings will only add to investor uncertainty over Microsoft’s ballooning AI spending, which saw its stock plummet last Thursday after the release of its latest quarterly earnings. They showed that although its net profits increased to $31 billion, its expenditures grew by 66 percent to $37.5 billion. Further sucking the air out of the room, revenue growth in its Azure cloud computing sector, the backbone of many of its AI efforts, showed a disappointingly modest growth in revenue of 38 percent, which was slightly worse than the year before.
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