Microsoft first started opening up access to Claude Code in December, inviting thousands of its own developers to use Anthropic&8217;s AI coding tool daily. It was part of an effort to get project managers, designers, and other employees to experiment with coding for the first time, and sources tell me that Claude Code has proved very popular inside Microsoft over the past six months. Perhaps a little too popular, as Microsoft is now preparing to walk back its Claude Code push.
I understand that Microsoft is planning to remove most of its Claude Code licenses and push many of its developers to use Copilot CLI instead. While Claude Code has been a popular addition, it has also undermined Microsoft&8217;s new GitHub Copilot CLI coding tool — a command line version of GitHub Copilot that runs outside of development apps like Visual Studio Code. This internal competition became a problem for Microsoft, as its own developers began favoring a third-party tool over the company&8217;s homegrown solution.
I&8217;m told that Microsoft&8217;s Experiences + Devices team, which includes the engineers responsible for Windows, Microsoft 365, Outlook, Microsoft Teams, and Surface, is winding down its usage of Claude Code by the end of June. Sources tell me that engineers are being encouraged to start transitioning their workflows to GitHub Copilot CLI in the coming weeks, ahead of the cutoff. The transition won&8217;t be smooth for everyone, as many employees have grown accustomed to Claude Code&8217;s capabilities.
Microsoft is telling employees that the decision is about converging on Copilot CLI as its main agentic command line interface tool across Experiences + Devices, but sources tell me the decision is also a financial one. The June 30th cutoff is the last day of Microsoft&8217;s current financial year, and canceling Claude Code licenses is an easy way to cut some operating expenses for when the new financial year starts in July. This timing is critical, as Microsoft seeks to streamline costs amid a broader push for efficiency.
“When we began offering both Copilot CLI and Claude Code, our goal was to learn quickly, benchmark the tools in real engineering workflows, and understand what best supported our teams,” says Rajesh Jha, executive vice president of Microsoft&8217;s experiences and devices group, in an internal memo seen by Notepad. “Claude Code was an important part of that learning… at the same time, Copilot CLI has given us something especially important: a product we can help shape directly with GitHub for Microsoft&8217;s repos, workflows, security expectations, and engineering needs.” This memo highlights Microsoft&8217;s desire to control its own AI tooling stack.
The transition away from Claude Code won&8217;t be an easy one for engineers inside Microsoft, though. Microsoft had been encouraging employees without any coding experience to experiment with Claude Code, allowing designers and project managers to prototype ideas. Microsoft had also originally expected employees to use both Claude Code and GitHub Copilot, to compare the two and provide feedback. But over time, developers gravitated toward Claude Code, creating a rift that Microsoft now wants to close.
Microsoft&8217;s own developers have favored Claude Code over GitHub Copilot CLI in recent months instead, and there are still gaps between the products that will now need to be addressed. Microsoft had reportedly considered acquiring Cursor in recent months to help close the GitHub Copilot gap, but has started looking at different AI startups to bolster its AI ambitions and avoid potential regulatory scrutiny. This suggests a broader strategy to invest in complementary technologies without triggering antitrust concerns.
“We are partnering closely with GitHub and continue to improve Copilot CLI for Microsoft engineers,” says Jha. “The GitHub team has already shipped significant improvements based on Microsoft feedback, and Experiences + Devices will remain closely involved in shaping the product. This is a shared accountability across GitHub and E+D leadership: to make Copilot CLI the best agentic coding experience for Microsoft engineers.” This accountability reflects Microsoft&8217;s commitment to making its own tool superior.
Anthropic&8217;s models will remain accessible through Copilot CLI, along with internal-only Microsoft models and OpenAI&8217;s range of models. I understand that Microsoft is planning to invest more in Copilot CLI so it&8217;s deeply integrated into Microsoft&8217;s own engineering workflows. Microsoft is also encouraging developers to file bug reports and feedback on Copilot CLI ahead of Claude Code being removed. This feedback loop is crucial for rapid iteration.
Microsoft quickly became one of Anthropic&8217;s top customers earlier this year and has even reportedly been counting selling Anthropic AI models toward its own Azure sales quotas. Microsoft also signed a deal with Anthropic in November that allows Microsoft Foundry customers to get access to Claude Sonnet 4.5, Claude Opus 4.1, and Claude Haiku 4.5. The decision to cancel Claude Code licenses won&8217;t have any impact on the Foundry deal, and Microsoft still continues to favor Anthropic&8217;s Claude models inside Microsoft 365 apps and Copilot, where they&8217;re more capable at certain tasks than OpenAI&8217;s counterparts. Microsoft also worked closely with Anthropic recently to bring the technology behind Claude Cowork into Microsoft 365 Copilot. This dual relationship with Anthropic and OpenAI shows Microsoft&8217;s multi-model strategy.
The pressure is now on Microsoft&8217;s GitHub team to improve Copilot CLI and try to surpass Claude Code in the process. Microsoft told me last year that 91 percent of its engineering teams were using GitHub Copilot, but Claude Code usage over the past six months has definitely had an impact on that number. Microsoft now wants to turn GitHub Copilot usage around and have its own engineers once again improving its own AI coding tool. This internal competition ultimately benefits the product, but the immediate cost savings are a clear priority.
In other news from Microsoft&8217;s ecosystem: Windows 11 is getting a macOS-like speed boost with a new &8220;Low Latency Profile&8221; that ramps up CPU frequencies for short bursts. Microsoft&8217;s Israel chief is leaving amid an investigation into work with the Israeli Ministry of Defense. Discord is adding a free Xbox Game Pass starter edition for Nitro subscribers. Forza Horizon 6 has leaked online a week before release. Microsoft was worried OpenAI would run to Amazon and badmouth Azure, as revealed in the Musk v. Altman trial. Microsoft may be teasing a new Xbox UI, and plans to share more about next-gen Project Helix later this year. The Xbox PC app hints at a China expansion for Game Pass. Microsoft also started layoffs at LinkedIn, cutting about 875 roles. Microsoft used its own AI model MDASH to find security vulnerabilities, leading to 16 CVEs fixed in Patch Tuesday. Windows Update will soon automatically roll back faulty drivers. Microsoft&8217;s Edge Copilot update uses AI to pull information from across your open tabs.
Source: The Verge News