Microsoft first started opening up access to Claude Code in December, inviting thousands of its own developers to use Anthropic’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. Sources indicate that Claude Code 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.
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’s new GitHub Copilot CLI coding tool — a command line version of GitHub Copilot that runs outside of development apps like Visual Studio Code. The Experiences + Devices team, which includes engineers responsible for Windows, Microsoft 365, Outlook, Microsoft Teams, and Surface, is winding down its usage of Claude Code by the end of June. Engineers are being encouraged to start transitioning their workflows to GitHub Copilot CLI in the coming weeks, ahead of the cutoff.
Microsoft is telling employees that the decision is about converging on Copilot CLI as its main agentic command line interface tool across Experiences + Devices. However, sources say the decision is also a financial one. The June 30th cutoff is the last day of Microsoft’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.
Rajesh Jha, executive vice president of Microsoft’s experiences and devices group, explained in an internal memo: “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. 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’s repos, workflows, security expectations, and engineering needs.”
The transition away from Claude Code will not be easy for engineers inside Microsoft. The company had been encouraging employees without any coding experience to experiment with Claude Code, allowing designers and project managers to prototype ideas. Microsoft had originally expected employees to use both Claude Code and GitHub Copilot, to compare the two and provide feedback. However, many Microsoft developers have favored Claude Code over GitHub Copilot CLI in recent months, 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.
Jha added: “We are partnering closely with GitHub and continue to improve Copilot CLI for Microsoft engineers. 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.”
Anthropic’s models will remain accessible through Copilot CLI, along with internal-only Microsoft models and OpenAI’s range of models. Microsoft is planning to invest more in Copilot CLI so it is deeply integrated into Microsoft’s own engineering workflows. Developers are encouraged to file bug reports and feedback on Copilot CLI ahead of Claude Code being removed.
Microsoft quickly became one of Anthropic’s top customers earlier this year and has even reportedly been counting selling Anthropic AI models toward its own Azure sales quotas. Microsoft 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 will not have any impact on the Foundry deal, and Microsoft continues to favor Anthropic’s Claude models inside Microsoft 365 apps and Copilot, where they are more capable at certain tasks than OpenAI’s counterparts. Microsoft also worked closely with Anthropic recently to bring the technology behind Claude Cowork into Microsoft 365 Copilot.
The pressure is now on Microsoft’s GitHub team to improve Copilot CLI and try to surpass Claude Code in the process. Microsoft told 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 move is part of a broader trend at Microsoft where the company is increasingly focusing on its own AI products and services, while still maintaining partnerships with other AI providers. The company’s investments in AI are deep and wide, ranging from its partnership with OpenAI to its own in-house models like MDASH. The decision to cancel Claude Code licenses reflects a desire to streamline its AI tooling and ensure that its own products remain competitive.
Other recent developments at Microsoft include Windows 11 getting a macOS-like speed boost with a new “Low Latency Profile” feature that ramps up CPU frequencies in short bursts. Microsoft’s Israel chief is leaving amid an investigation into the company’s work with the Israel Ministry of Defense. Discord has added a free Xbox Game Pass starter edition for Nitro subscribers. Forza Horizon 6 has been leaked and cracked a week before its release. The ongoing Musk v. Altman trial has revealed internal communications about Microsoft’s worries that OpenAI would run off to Amazon. Microsoft has also teased a new Xbox UI and shared more about Xbox Project Helix coming later this year. The company is expanding Game Pass to China with “Project Saluki.” LinkedIn is undergoing layoffs, cutting about 5 percent of its headcount. Microsoft used its own AI model MDASH to discover 16 CVEs in this week’s Patch Tuesday. Windows Update will soon automatically roll back faulty drivers with a new “Cloud-Initiated Driver Recovery” feature. And Microsoft’s Edge Copilot update uses AI to pull information from across all open tabs.
The cancellation of Claude Code licenses is a significant shift in Microsoft’s internal AI tooling strategy. It highlights the challenge of balancing the use of third-party AI tools with the promotion of in-house products. The success of this transition will depend on how quickly GitHub Copilot CLI can close the gap with Claude Code and how well Microsoft’s engineers adapt to the change. With the June 30 deadline approaching, the next few weeks will be critical for Microsoft as it works to ensure a smooth migration for its thousands of developers.
Source: The Verge News