Microsoft's AI Struggles: No One Wants Its Subpar Products

Microsoft's Struggle in the AI Era

Microsoft, under the leadership of CEO Satya Nadella, has faced significant challenges in maintaining a strong connection with its customers. Over the years, the company has quietly shut down its retail arm and closed numerous consumer products, while seemingly drifting from one technological trend to another. From blockchain to the "metaverse" and now artificial intelligence, Microsoft's inability to prioritize effectively has led to growing concerns about its direction.

A recent report by The Information highlighted that Microsoft's internal AI efforts are encountering difficulties, with reduced forecasts and sales goals for its Azure AI products. According to the report, Microsoft's sales teams are struggling to meet targets due to a lack of demand. While Microsoft has denied these claims, market share growth trends suggest that Google Gemini is gaining ground on Microsoft Copilot.

Market Share Trends and Challenges

Last week, we discussed how Microsoft Copilot's backend partner, OpenAI, is facing a "code red" situation. ChatGPT has fallen behind Google Gemini in problem-solving capabilities, and Nano Banana image generation has surpassed OpenAI's DALLE by a significant margin. With OpenAI's business model under scrutiny and accumulating dangerous levels of debt, it's becoming a cascading issue for Microsoft to have tied its business to what might become a declining entity.

Here is a snapshot of generative AI chatbot market share as of December 3, 2025:

1. ChatGPT (excluding Copilot) – 61.30% market share, with 7% quarterly user growth.
2. Microsoft Copilot – 14.10% market share, with 2% quarterly user growth.
3. Google Gemini – 13.40% market share, with 12% quarterly user growth.
4. Perplexity – 6.40% market share, with 4% quarterly user growth.
5. Claude AI – 3.80% market share, with 14% quarterly user growth.
6. Grok – 0.60% market share, with 6% quarterly user growth.
7. Deepseek – 0.20% market share, with 10% quarterly user growth.

Despite research indicating that agentic AI tools often require frequent human intervention, making them cost-ineffective, Microsoft seems indifferent to the shortcomings of its tools.

Google's Advantages and Microsoft's Disadvantages

Google's AI advantages are steadily increasing, while Microsoft's disadvantages continue to accumulate. Whether it's Google's Tensor server technology or its dominant position with Google Play-bound Android, Microsoft's lack of foresight and attention to its actual customers is starting to impact the company negatively. Nadella has attempted to blame the company's size for the lack of innovation, but this appears more like an excuse than a genuine explanation. It's all about priorities — and Nadella has focused more on shareholder sentiment than delivering value to customers or employees. This short-term approach could put Microsoft at a disadvantage if AI indeed brings about another computing paradigm shift.

Microsoft relies heavily on expensive NVIDIA technology for its data centers, whereas Google is investing in owning the entire stack. Microsoft has also rushed to incorporate half-baked AI features into its products, while Google has taken a more thoughtful approach. Microsoft initially gained momentum like a bull in a China shop, and investors rewarded them for it. However, by 2025, Google's AI products are proving to be more effective and better aligned with real-world usage.

User Experience and Quality Concerns

As someone who actively uses AI features across Google Android and Microsoft Windows on a daily basis, the gap between the two companies is becoming increasingly apparent. Basic features like photo editing on Google Pixel phones are far superior to the subpar tools found in the Microsoft Photos app on Windows. Google Gemini in Google Apps is also significantly smarter and more intuitive than Copilot on Microsoft 365, based on my experience using both in different business contexts.

Microsoft's "ship it now, fix it later" attitude risks giving its AI products an Internet Explorer-like reputation for poor quality. The company's strategy for AI seems to revolve around offering cheaper, lower-quality products at lower costs, such as Microsoft Teams. Whether this strategy will work for artificial intelligence, which is exorbitantly expensive to run, remains uncertain.

Future Outlook and Strategic Shifts

Microsoft's early investment in OpenAI gave it a strong position initially, but cracks are beginning to show as the industry evolves. Many of Microsoft's AI products currently scream of a lack of direction and chaos. However, there is some hope. Some of Microsoft's enterprise solutions for AI are showing strong growth. GitHub Copilot has been a notable success story, and Microsoft is exploring its own Maia and Cobalt chips, as well as language models, to reduce dependency on NVIDIA and OpenAI.

Despite these efforts, Nadella's Microsoft has a history of failing to deliver on promising initiatives. Without a stronger focus on quality, Microsoft's future in AI could revolve around reselling NVIDIA server technology and increasing local electricity prices rather than providing real home-grown innovation. Shareholders may be content with this role, but it would mark a disappointing legacy for a company once known for its innovation.