Microsoft has undoubtedly doubled down on generative AI, especially after locking in a multi-billion-dollar partnership with OpenAI in 2019. While co-founder Bill Gates was skeptical about the company's initial $1 billion investment in OpenAI, primarily because of its non-profit business structure, the company has since integrated AI across its tech stack.
I recently reported that Microsoft has generated approximately $30 billion from OpenAI between 2023 and 2025, but somehow burned through $100 billion in costs from infrastructure to hosting to get there. As such, it's unclear whether the company is making bank from its big bet on AI.
For context, Velloso worked at Microsoft for over 12 years as Partner Director managing AI innovation in Windows, including 4 years as Microsoft CEO Satya Nadella's technical advisor. He then transitioned to Google, where he led AI developer products at Google DeepMind, including the Gemini API, before his recent stint at Meta’s Superintelligence Labs as the VP of Product for the Developer Platform.
This means that the executive has worked across three of the top companies in the AI arms race, placing him in a unique position to comment on the trajectory of AI. Velloso listed several reasons highlighting why Microsoft missed its opportunity in the AI wave, including:
- You make Bing your biggest bet with AI. Not a single percentage point of user share goes up from that investment
- You bet on Copilot with AI. Not even 3% of paying users use it, even when the distribution is massive, and it's pre-deployed right in their faces
- Then you hire the wrong people and assign them to jobs they are obviously not qualified to do. It gets worse.
- Your OEMs invest on NPUs to then find out that nobody cares because not a single valuable use case was built for those in Windows/Office.
- Your GitHub, which should be thriving in the age of AI, drops below 90% SLA.
Let's see...1-You make Bing your biggest bet with AI. Not a single percentage point of user share goes up from that investment2-You bet on Copilot with AI. Not even 3% of paying users use it, even when the distribution is massive, and it's pre-deployed right in their faces… https://t.co/jje7AncboGApril 9, 2026
The executive's post on X gained some traction and engagement, including from Microsoft's head of communications, Frank X. Shaw. "As you may know Mat, there are times when reality is enough of an answer, and given that you worked with some of these wildly impressively long-tenured people you could just maybe say congrats for a great run and not jam into a negative frame," Shaw said, while defending the exodus of executives from the industry giant.
Velloso defended his point of view by comparing Google and Microsoft's shares. According to the executive, Google's shares skyrocketed to approximately 230% while Microsoft's remained at 0% when he moved to Google in 2024.
I suppose the whole market is also wrong about this. But what do I know? I only saw both companies, how they operate, their strengths, and their flaws.
Mat Velloso
During Microsoft's Q3 FY26 earnings call, CEO Satya Nadella indicated that the company now has more than 20 million enterprise customers paying for Microsoft Copilot, representing a 33% increase in the platform's user base from January's 15 million.
However, Velloso claims not even 3% of paying customers use Copilot, "even when the distribution is massive, and it's pre-deployed right in their faces." This lines up with a separate report suggesting that only 3.3% of Microsoft 365 and Office 365 users who interact with Copilot Chat actually pay for it, despite Microsoft spending $37.5 billion on its AI-themed efforts in Q2 FY26.
Microsoft's AI strategy
At the beginning of the year, Microsoft promised to make Windows 11 better by improving the operating system's overall user sentiment. As part of its ongoing Windows K2 initiative to overhaul and rehabilitate the OS, Microsoft is reducing where Copilot and its integrations appear.
Simultaneously, the tech giant overhauled its Copilot management with ex-Snap Jacob Andreou now leading Copilot experiences, both consumer and commercial, as an executive vice president reporting to Nadella. This frees Microsoft AI CEO Mustafa Suleyman from some of his duties, allowing him to focus on developing in-house frontier AI models while chasing down the coveted superintelligence benchmark.
Over the past few months, investors have raised concerns over Microsoft's exorbitant spending on AI, questioning its capability to establish a clear path to profitability. This is amid claims that the AI bubble is on the verge of bursting, prompting market analysts to predict that investor interest in AI might be waning and could eventually be channeled to other profitable ventures in the foreseeable future.
Interestingly, some investors claim that AI startups like OpenAI and Anthropic are developing agents that could replace established productivity suites such as Microsoft 365 as Microsoft focuses on AI. Microsoft plans to double down on its AI efforts by investing up to $146 billion in infrastructure in 2026.
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