Microsoft is positioned to win in AI coding. Interruption got in the way

Microsoft he had all the pieces to win at vibe coding, thanks to the imminent acquisition of GitHub, a company he bought for $7.5 billion in 2018.

But repeated shutdowns, huge profits, and the growing popularity of new tools like Claude Code’s Cursor and Anthropic have eaten away at GitHub’s early advantage in manufacturing artificial intelligence, creating another challenge for Microsoft CEO Satya Nadella as he tries to fix his company’s AI story.

GitHub’s trust challenges in recent months have affected large companies such as Ciscoand it is written by influential names in software development. Mitchell Hashimoto, founder of HashiCorp, which IBM found last year, he wrote in a blog post last month that GitHub is “no longer a place for hard work if it blocks you for hours a day, every day.”

Early Wednesday, GitHub said an employee’s device was vulnerable to a security incident. The attacker was able to access approximately 3,800 GitHub code libraries.

Some companies are looking for other tools that manage and extract code. And there are options, though GitLab or contributions from Amazon again Atlassian. Jyoti Bansal, CEO of software delivery startup Harness, said his company has also tested and introduced a code storage feature.

“We are hearing real concern from corporate customers, and many of them are looking at alternatives,” Bansal said.

For Nadella, whose 12-year run at Microsoft has been highlighted by a successful pivot to cloud computing, the AI ​​era seems bleak. With AI development now in its fourth year, Microsoft has struggled to carve out a clear path despite playing a key role early on thanks to the company’s heavy investment in OpenAI and its cloud infrastructure business.

Microsoft, which widely promotes its Copilot technology, has lagged behind online rivals in creating AI tools and services that engage users. That helps explain why the stock price is down 13% this year, trailing all of its megacap peers.

With GitHub, Microsoft’s flubs stand out because the service has given the company the distinct advantage of a home platform with code. GitHub has six times more developers than when Microsoft bought the company eight years ago.

In the so-called devops market, GitHub is ahead of GitLab, according to customer spend data from First Ramp, which issues corporate credit cards. And according to Stack Overflow’s 2025 developer survey, GitHub is the most popular tool for collaboratively managing work or code.

The software developer market has seen an increase in the early adoption of AI-assisted coding, or vibe coding, as agent AI allows developers to increase their productivity. Nadella said in October that GitHub is “growing at the fastest rate in its history, adding a developer every second,” to a total of 180 million developers. Later in the year, GitHub began to see rapid growth in the creation of code libraries and adoption of code reviews.

In a recent earnings call in April, Nadella said, “When it comes to developers, GitHub itself is seeing unprecedented growth, driven by an increase in agent code, and we’re working hard to scale and meet this demand.”

But under increased pressure, GitHub’s infrastructure has weakened. Since March, GitHub has suffered more than a dozen incidents that lasted more than an hour, according to its status page.

“We haven’t met our availability standards,” wrote Vlad Fedorov, chief technology officer at GitHub, in a March blog post. At the time, 12.5% ​​of GitHub’s traffic was passing through the region’s Microsoft Azure data centers in Iowa, with plans to provide 50% of traffic from Azure by July, he wrote.

Instead of relying strictly on Azure, GitHub has been counting on a dedicated data center infrastructure in northern Virginia for years. With the added burden, GitHub ran out of space, said two people familiar with the matter who asked not to be identified to discuss internal matters.

Information previously reported on GitHub releases.

GitHub leaders have, on several occasions, considered a major move to Azure, which has data centers on every continent, but those plans were shelved, one of the sources said. Another said that GitHub intended to migrate to Azure, but the migration took too long. Negotiations with Microsoft over capacity requirements have delayed GitHub’s Azure acquisition, the people said.

Meanwhile, there was chaos upstairs. Thomas Dohmke announced his departure as CEO in August after four years on the job. He is yet to be replaced.

Some GitHub employees have gone to work for Julia Liuson, a 34-year Microsoft veteran who ran the developer division. Liuson announced his retirement in April.

Earlier this month, Microsoft Xbox CEO Asha Sharma, who previously worked at GitHub as product president of the CoreAI engineering group, said GitHub Vice Presidents Tim Allen and Jared Palmer are joining his division.

GitHub declined to comment.

To deal with deployment attacks, administrators have looked beyond Azure. Today the service depends on Amazon, GoogleMicrosoft and The Oracle of cloud infrastructure, in addition to maintaining its services.

“While already continuing to migrate from our small custom data centers to the public cloud, we began working on the path to multi-cloud,” Fedorov wrote in an April blog post. He said GitHub’s top priority is availability and making sure its resources are working properly.

There was a disappointing turnover.

Ryan Oksenhorn, founder of the drone delivery startup Zipline, wrote in a post on X last month that his company is testing GitLab again. Atlassian’s Bitbucket after GitHub accidentally changed the code updates, and then provided instructions to revert the changes. Oksenhorn called it a “bad, bad bug,” noting that his company was “still cleaning up its mess” after GitHub failed to provide support.

GitHub’s own developers, who can use GitHub Copilot as much as they want, don’t always fully review the code suggested by the AI ​​agents, one of the sources said. Corporate policy prohibits employees from compiling code without human review, said a third person, who also asked not to be identified to discuss internal matters.

Downtime is not the only problem.

“Right now people are tired of the instability, the maturity of the product, the noise of Copilot AI, the unclear leadership, and the feeling that the platform is no longer designed primarily for the community that made it valuable,” Armin Ronacher, the creator of the Flask open source software for building web applications, wrote on his blog. “Obviously, GitHub is also in the midst of a code-agent revolution and that’s putting a lot of pressure on people over there. But the site has no leadership! It’s a wonder things are going as well as they are.”

The blackout affected part of the Ciscopassing on the problem to its customers, said DJ Sampath, who is the company’s vice president. Sampath said Cisco has “failsafes,” and uses enterprise versions of GitHub on its servers.

GitLab CEO Bill Staples has been trying to implement GitHub’s challenges.

“Tired of pain yet? Come to GitLab and take control of your destiny,” Staples wrote in a post on X. “I’ll throw in the first year for free to anyone from GitHub who signs a new three-year deal.”

Without mentioning GitHub by name, Staples told employees in a memo that “platforms that aren’t built for machine scale are starting to break under them.”

For GitHub, it’s a particularly inopportune time to lose customers. Few markets are growing faster than AI-assisted coding.

OpenAI said in April that 4 million people were using the Codex code agent, up from 3 million less than two weeks earlier. Anthropic’s Claude Code tool has grown significantly this year, which is a big reason why the company’s private market valuation recently rose to $900 billion from $380 billion in February.

Cursor continued to find use quickly, and struck a deal with SpaceX in April, giving Elon Musk’s company the right to acquire it for $60 billion. Cursor overtook GitHub Copilot in market share about a year ago and has retained the lead among customers using Ramp, according to that company’s data.

A March survey of 636 software professionals from engineering analytics startup Jellyfish showed that GitHub Copilot was used more than Claude Code and Google’s Gemini Code Assist. It’s after Nadella said in January that GitHub Copilot had 4.7 million paid subscribers, a 75% increase over last year.

GitHub was there first, announcing Copilot in 2021. Fedorov is talking internally about the need for Copilot to regain leadership, one of the sources said. Management is pressuring employees to match the latest Cursor features, two of the people said.

“I think the general perception is that they are lagging behind, because they are some of the early adopters, but they haven’t developed as quickly as some of the independents have,” said Tom Murphy, an analyst and researcher at technology industry firm Gartner.

Dohmke, the most recent CEO of GitHub, wrote in a post on X last month that the company did not invest properly in AI, noting that more than 90% of employees “are allocated to the main product and the first things.”

“Making Copilot a victim of availability issues is not something the past or current leadership will agree to,” he wrote.

GitHub said in April that it was temporarily suspending requests for new GitHub Copilot plans, which start at $10 per month.

“As Copilot’s agent capabilities expand rapidly, agents are doing more work, and more customers are reaching usage limits designed to maintain service reliability,” Microsoft Vice President Joe Binder said in a blog post. “Without an extra step, the quality of service degrades for everyone.”

GitHub wants to improve the economics of Copilot. In June it will start charging based on how much people use it. GitHub has provided a calculator to help customers figure out their new costs, and social media posts suggest the service is more expensive. And that might lead some developers to abandon Copilot.

Jeremy Bray, a former senior software developer at FanDuel Sports Network, said he stopped paying for GitHub because of the price increases.

“I canceled my GitHub Pro account, so now I have a regular free account, which can do a lot more,” Bray said.

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