Microsoft’s Copilot chatbot has become central to the company’s artificial-intelligence strategy close partnership is reduced with OpenAI. But efforts to build it as a ChatGPT alternative have been difficult.
Current and former employees who have worked on Microsoft’s AI products said confusing brand positioning and interoperability problems have frustrated users. Only a small portion of Microsoft’s enterprise suite customers use Copilot, according to data reviewed by the Journal, and the percentage who prefer it over Google’s Gemini or other tools has declined in recent months.
The stakes are high for Microsoft because Copilot is the core of Chief Executive Satya Nadella’s effort to transform Microsoft into an AI-first company, just as he transformed it into a cloud-first company nearly a decade ago. Current and former executives said Copilot is one of Nadella’s top priorities.
After this Microsoft shares fell Last week’s earnings report Investors have grown concerned that growth in its most important unit, the Azure cloud-computing business, is slowing, and that its AI business is dependent on OpenAI while Copilot remains unproven. Shares fell about 3% on Tuesday amid a slide in software stocks, driven by fresh concerns that AI tools will make enterprise subscriptions less necessary.
“We have moved beyond the early stages of AI discovery,” Nadella wrote. December blog postSaying that the industry is entering a phase where “we are starting to differentiate between ‘spectacle’ and ‘substance’.”
Even though Microsoft is lagging so far in the chatbot race, it is still earning billions of dollars from AI-driven cloud-computing demand, placing it among the most valuable companies in the world. And analysts believe the company is well positioned to bridge the gap because its productivity software is used by hundreds of millions of corporate users, a captive audience to whom it can easily promote new AI products.
Chad A. Morgenlander, senior portfolio manager at Microsoft investor Washington Crossing Advisors, said that while Copilot is struggling right now, “Our bet is that they have this underlying customer base, and until they get it right, they’re going to get it wrong. They have a lot of money for Marathon.”
Microsoft has several versions of Copilot that are woven into apps and services, including its 365 productivity tools like PowerPoint and the GitHub developer platform. A consumer-facing version is also available through its Edge browser and an app.
The various Co-Pilots are divided into three main categories: enterprise tools that Microsoft sells to companies and professionals, Co-Pilots for developers and IT personnel, and general consumer chatbots led by Microsoft AI CEO Mustafa Suleiman.
Microsoft hired Suleiman in 2024 to oversee its consumer AI products and build AI models that can compete with OpenAI and others. Until now, Microsoft has relied on OpenAI and its competitor, Anthropic. To provide power to your various co-pilots And has said that he will use the best models available.
Last week, Microsoft reported that it had sold 15 million corporate Copilot “seats” in its 365 productivity business, bringing the base total to more than 450 million paid seats. The company said late last year that it had more than 150 million monthly active Copilot users on its first-party platform. Google’s Gemini has more than 650 million monthly users, while ChatGPT has nearly 900 million weekly active users.
Previously unreported data shows that Copilot customers, including those with corporate accounts, are increasingly favoring competing alternatives.
From last July to the end of January, the percentage of Copilot customers using the product as a primary option dropped from 18.8% to 11.5%, according to a survey of more than 150,000 respondents in the US by market research firm Recon Analytics. This came as the share of paying users choosing Google’s Gemini as their first option increased from 12.8% to 15.7%.
Those surveyed who switched from Copilot said they found better quality elsewhere, with some citing poor user experience and restrictive usage limitations. Recon data shows that workers who have access to subscriptions to Copilot, ChatGPT, and Gemini choose ChatGPT and Gemini at a higher rate than Copilot.
According to a recent note from analysts at Citi Research, some companies are only using 10% of the Copilot membership seats they are paying for. “Disorganized data silos” have been an issue for Copilot, the analysts wrote.
In an interview, Jared Spataro, Microsoft’s chief marketing officer of AI, said that daily active usage of 365 CoPilot has grown 10x year-over-year and is outpacing the growth of other 365 enterprise offerings. Spataro challenged the city’s findings, saying, “The pace of growth we’re seeing is unlike anything we’ve seen before,” but he declined to provide specific figures.
People familiar with the matter said Microsoft’s customer survey showed that users became confused by the multiple versions of CoPilot. Some users have complained about Copilot for a long time they are being pressuredPopping up on everything from documents to browsers.
One issue cited by current and former employees is the lack of a cohesive experience across different Co-Pilots, a user pain point that Nadella has flagged in the past. About a year ago, Nadella sent a frustrated email to Rajesh Jha, executive vice president of experiences and devices, detailing an incident in which Nadella asked the enterprise version of Copilot on the Edge browser to help him navigate to a public webpage, but it didn’t meet his prompt, according to people familiar with the email.
The issue raised by Nadella was resolved, but similar interoperability difficulties remain for users.
In recent weeks, a new AI product from Anthropic, called Cloud Cowork, has won praise for its ability to work across 365 applications in a way that Copilot users find difficult. The release of new cowork features was a factor behind Tuesday’s decline in software stocks. A person familiar with the matter said Microsoft product leaders have discussed Cowork and the company has worked on a similar product internally.
Chief marketing officer Spataro said the separation between 365 CoPilot and the consumer version is by design so users can keep their work and personal information separate.
Some employees said an organizational silo between Suleiman’s consumer-facing team and teams working on enterprise versions made it challenging to achieve a unified approach.
Efforts to train the proprietary model have also been hampered by a lack of computing capacity, with the company limiting server time to ensure availability for OpenAI and other customers of its Azure cloud service. In many benchmark tests, Microsoft’s flagship proprietary AI model lags far behind competitors.
In an interview, Scott Guthrie, executive vice president of Microsoft’s Cloud and AI Group, said that Suleiman’s team was only created in 2024. He said the long timelines involved in building the cloud infrastructure explained the team’s lack of computing capacity until recently.
In its recent earnings report, Microsoft said it was allocating more computing power to improving its CoPilot products as it grew more confident in its ability to monetize them, but according to a note from investment firm UBS, shareholders are not yet showing they buy that trade-off.
One place where Microsoft is having success in getting more people to use Copilot is within its own workforce. Nadella has urged the company’s leaders and employees to lean toward AI tools in what it calls a “frontier firm.” Microsoft has instructed managers to include questions about AI use in performance discussions, and asked employees to determine how they are using AI tools like Copilot in their workflow, according to people familiar with the matter.
Pam Maynard, chief AI transformation officer for Microsoft’s Customer and Partner Solutions organization, said the adoption rate within Microsoft’s sales organization has grown from about 20% to more than 70% in the past year as more employees have become comfortable using AI.
The company, which laid off more than 15,000 employees last year, created a boot camp for software engineers, designers and product managers to immerse themselves in the latest AI tools, with the goal of using AI to work together more efficiently.
The camp is “about getting people really comfortable changing their mindset from ‘I used to think of myself as a great coder, now I’m a product builder,'” Katie George, corporate vice president of workforce transformation, said in an interview.
George, whose team was formed last year, said Microsoft has found that consistent AI use correlates to success in areas like sales..
While employee use could lead to a more AI-literate workforce and help refine the product, Microsoft still needs more consumer and business users to choose Copilot.
To this end, Microsoft is spending heavily to increase the visibility of the brand. In 2025, it spent about $60 million on television ads for Copilot, according to ad tracker iSpot. In comparison, it spent less than $1 million on ads for LinkedIn, its next most advertised brand, on TV.
on sunday, The company plans to run an ad for Copilot during the Super Bowl, its second ad since 2024. A 30-second spot during a game can be worth more than $8 million.
Write to Sebastian Herrera sebastian.herrera@wsj.com
