As Google’s Gemini surges and ChatGPT dominates, Microsoft faces a harsh reality: businesses just aren’t buying the hype yet.
- Drastic Cuts to Targets: Microsoft has reportedly slashed sales targets for its agentic AI tools by up to 50% due to a lack of buyer interest and overestimation of market demand.
- Performance Issues: Tests reveal that current AI agents fail to complete tasks up to 70% of the time, making them unreliable for the workforce replacement roles they were advertised for.
- Losing Market Share: While ChatGPT commands over 60% of the market, Google’s Gemini is growing rapidly and is poised to push Microsoft’s Copilot into a distant third place.
For a brief moment, it seemed as though Microsoft had won the AI race before it even truly began. By securing a massive, early stake in OpenAI and rapidly integrating models into Bing Chat and Copilot, the tech giant appeared to have an insurmountable lead while rivals like Google and Meta were still tying their shoes. However, the narrative has shifted dramatically. Recent reports indicate that Microsoft’s momentum has stalled, forcing the company to scale back its ambitious goals as it struggles to convince customers that Copilot is worth the price tag.
The Reality Check: Slashing Sales Goals
According to a report by The Information, Microsoft has significantly reduced its sales targets for its agentic AI software—in some cases by as much as 50%. The primary driver behind this retreat is a stark lack of buyers. Despite the massive marketing push and the integration of AI into the ubiquitous Windows ecosystem, businesses are not biting at the rate Microsoft anticipated.
The company appears to have severely overestimated the immediate commercial potential of these tools. While Microsoft issued a somewhat defensive statement claiming that “aggregate sales quotas for AI products have not been lowered” and suggesting the reporting conflates growth with quotas, the underlying signal is clear: the aggressive monetization strategy is hitting a wall. Like the rest of the industry, Microsoft is finding that converting AI buzz into reliable profit is far more difficult than generating headlines.
The Utility Problem: Why It Isn’t Working
The hesitation from buyers isn’t just about budget; it is about utility. For AI to be a viable commercial product for enterprises, it needs to be reliable, and current data suggests Copilot is falling short.
Tests conducted earlier this year painted a worrying picture for the “agentic” future of AI. These AI agents failed to complete tasks up to 70% of the time. For businesses looking to automate workflows, a tool that fails more often than it succeeds is not an asset—it is a liability. While the technology was touted as a potential workforce replacement, the high failure rate renders it redundant for that purpose. At best, these tools currently serve as productivity aids for already skilled employees, helping to speed up low-level tasks. However, since those tasks were traditionally delegated to lower-level employees anyway, paying a premium for an AI that “might” do the job is a hard sell.
The Rise of Gemini and the Fall to Third Place
Compounding Microsoft’s internal struggles is a rapidly changing competitive landscape. Microsoft’s early advantage is evaporating as competitors find their footing. Windows Central reports that OpenAI’s ChatGPT remains the undisputed king of the hill, commanding a massive 61% of the market.
The real threat to Microsoft, however, is Google. Following a robust 12% growth over the last quarter, Google’s Gemini is now breathing down Copilot’s neck. The market share gap between the two is now less than 1%, with Microsoft holding roughly 14%. If current trends continue, Gemini is on pace to relegate Copilot to third place. This is a significant blow to Microsoft, considering their heavy investment and first-mover status.
A Feature in Search of a User
The data reflects a sentiment shared by many everyday users: Copilot is present, but often ignored. Despite being baked into the Windows operating system, it has not fundamentally changed how people use their computers.
The disconnect between Microsoft’s technological capability and actual user behavior is growing. As the novelty fades, the company is left with a powerful, expensive infrastructure that few people find essential to their daily lives. Unless Microsoft can drastically improve the reliability of its agents and prove their worth to hesitant enterprise buyers, Copilot risks becoming a legacy feature rather than the revolution it was promised to be.