Microsoft is often referred to as the software giant — and for a good reason. Windows and Office are among the most profitable products in its ecosystem, thanks to their widespread global adoption. However, the tech giant has seemingly shifted its focus from its bread and butter to chase the elusive generative AI.
It dates back to Microsoft's first investment in OpenAI in 2019. CEO Satya Nadella revealed that his company's original co-founder, Bill Gates, wasn't party to the idea, citing the AI firm's non-profit structure. "Yeah, you're going to burn this billion dollars," Gates warned.
Conversely, a separate report claimed that Bill Gates is still intimately involved in Microsoft's affairs, despite stepping away to focus on his philanthropic efforts. His advice is reportedly regarded as gospel, with Nadella frequently relying on his guidance for the company’s transformative AI initiatives.
Nevertheless, Satya Nadella indicated that the company was moving away from Bill Gates' software factory vision: "That idea has guided us for decades," he indicated. "But today, it's no longer enough." According to Nadella, that original vision is becoming outdated as we edge closer to the AI revolution.
Instead, Microsoft is pivoting to security, quality, and AI transformation as its core business priorities. While it sounds good on paper, reality paints a very different picture (at least in the short term). Microsoft has faced a wide array of challenges in this age of AI, which could potentially undermine the backbone that has propelled it to a market capitalization of 2.82 trillion.
Too little, too late for Windows?
I've used Windows all my life, with a few side quests with Linux (Ubuntu) and macOS. Over that period, there's been a paradigm shift in Microsoft's OS, and not necessarily for the better. Windows 11's slow adoption rate before Windows 10's death is a clear depiction.
Many blatantly expressed their preference for the previous edition for a range of reasons, including Windows 11's stringent hardware requirements, flawed design elements, and more.
According to a recent HP survey, 3 out of 10 HP PCs are still running Windows 10 despite Microsoft pulling the plug on October 14, 2025. Then again, the number of Windows 10 holdouts has slightly decreased from September 2025, when HP and Dell indicated that up to 50% of PCs were still running on the operating system.
As a result, many users may not switch to Windows 11 immediately, instead delaying the upgrade until later this year, likely when ESU support officially ends.
Consequently, groups like The Restart Project group, which helped co-develop the "End of 10" toolkit to support Windows 10 users who can't upgrade to Windows 11, claim Microsoft's move to continue pushing security updates to Windows 10 beyond its end-of-support feels like a last-minute snooze button, which only acts as a band-aid on a bleeding system.
Critics have even branded Windows 10's end of support as programmed obsolescence on Microsoft's end, because the move forced millions of working PCs into early retirement, as they didn't meet the requirements to upgrade to Windows 11.
While it might seem like a stretch to some, rival platforms like Linux have shown some increased traction with incentives like a lack of ads and telemetry tracking fueling the switch from Microsoft's ecosystem. Some of our own Windows Central community members share the same sentiments, too.
That said, it might be too early to write off Windows. At the beginning of the year, Microsoft pledged to improve the overall user sentiment around the operating system, and has made good on its promise with its Windows K2 initiative (an internal initiative designed to address major pain points across Windows 11 based on customer feedback), including reducing where Copilot and other AI integrations appear across the operating system.
The company even brought back Windows Insider meetups to bridge the gap between users and the Windows development team, potentially making it easier to voice concerns and even provide feedback that will help steer the platform in the right direction.
However, Microsoft plans to evolve Windows into an agentic AI operating system — a move that has been received with mixed feelings. It indicated that Windows will ship with a new agentic workspace feature right out of the box, containing AI agents in their own secure sessions.
Last month, Yusuf Mehdi, Microsoft’s head of product marketing for AI and Copilot, transitioned to a new role focused on "reimagining Windows for the agentic era" before eventually departing the company. This is a clear indication that the evolution of Windows into an agentic OS is already on track and could happen sooner than you think.
It'll be interesting to see how this will impact Microsoft's massive market share on desktops with Windows, and whether users will jump ship to "less intrusive" alternatives.
Office lost Teams, and Microsoft thought Copilot would sweeten the deal
In case you missed it, Microsoft unbundled Teams from Office 365 to dodge EU antitrust fines in 2025. The new arrangement offers Office 365 and Microsoft 365 without Teams at a lower cost, at around $2.20 (€2) less per user each month. This means you'll have to get Teams as a standalone service for about $5.50 (€5) per user per month.
In April, Salesforce filed a lawsuit against Microsoft, citing anticompetitive practices related to its Microsoft Teams app: "Microsoft's practices harmed competition, using tying and bundling of Teams to limit customer choice," the Slack maker claimed.
However, Microsoft dismissed the claims, citing that the antitrust case lacked merit. At the same time, it used the opportunity to throw jabs at Slack's lackluster growth and inferior capabilities compared to Teams and Zoom.
In the interim, Microsoft Office could potentially be looking at a competitive threat from the likes of The Document Foundation's LibreOffice and even newcomers like Euro-Office.
Euro-Office is Europe’s bold alternative to Microsoft 365, promising sovereignty and control. Perhaps more interestingly, the service ships a familiar user interface as Microsoft's service, which should technically make the jump less drastic for users.
However, the threat doesn't seem that serious, at least in the short term, unless the rival platforms address major concerns affecting their services and commit to improving compatibility. According to Windows Central member, GraniteStateColin:
"Microsoft Office is cheap and excellent. It's a bargain for anyone who benefits from its feature set. If all you need is a simple text entry window, then it is overkill, but at $20/year/user ($120/year for 6 users), it's still one of the cheapest options. That's $2/mo! If that's what's bankrupting Europe, they have bigger problems."
"LibreOffice's compatibility with MS Office docs is terrible. If there's anything more than the occasional bold or italic word, formatting is almost always a mess when trying to open a LibreOffice document in Word. That's on them, not Microsoft. They have had access to the file standards for more than a decade and CHOSE not to implement them properly."
This isn't the first threat to Microsoft's dominance with Windows and its Office productivity tools. In April, the French government revealed that it was ditching Windows for Linux as part of the country's broader strategy to reduce its dependence on American tools.
Similarly, at the beginning of this year, France announced plans to ditch Microsoft Teams and Zoom for a domestically developed platform called Visio across its public institutions by 2027.
Microsoft's toxic relationship with AI
Last year, Microsoft started automatically installing the Copilot AI app on Microsoft 365 users' Windows PCs. However, it temporarily suspended the forced installation following backlash and complaints from users, including a critical bug that allowed the chatbot to access sensitive data and read confidential emails.
However, the company is resuming automatic Microsoft 365 Copilot installations, starting July 1, for all Microsoft 365 users. It's worth noting that admins can opt out of the experience.
Despite Microsoft's fixation on AI, shareholders recently filed a class action lawsuit against the company, alleging it deliberately overstated Copilot’s success and its partnership with OpenAI. They also claimed that Microsoft failed to disclose Azure’s revenue slump while pouring billions into expanding AI data center infrastructure.
Market analysts and experts warned that Microsoft could be facing its worst quarter since the 2008 financial crisis if it continues blowing money on AI that isn't meeting investor expectations for returns.
Microsoft's big bet on AI and consequent setbacks go beyond Office and Windows; Azure is a victim too. According to a former engineer, Microsoft reportedly rushed the service into the market to compete with Google and Amazon.
This resulted in a talent exodus and lackluster software, which seemingly left Microsoft's cloud fragile and unable to compete on an even playing field with competitors. Either way, the next few years will reveal whether Microsoft's AI gamble strengthens its legacy products or leaves them further behind.
What are your thoughts about the current state of Windows and Office as Microsoft pivots to AI? Share your thoughts with me in the comments.
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