Microsoft replaces OpenAI, Anthropic models with own AI in 2 apps

Microsoft Corp. is replacing artificial intelligence models from OpenAI and Anthropic with its own internally built MAI models in Excel and Outlook, processing tens of thousands of AI prompts weekly as the software giant moves to cut costs and reduce reliance on external providers.

"We pay a lot of money to Anthropic — so our goal is to reduce and ultimately eliminate that cost," Mustafa Suleyman, head of Microsoft's AI model division, said at the company's Build conference in June.

The shift, which hasn't been previously reported at this scale, comes as Microsoft announced seven new AI models at its June Build conference, including one that matches the coding ability of Anthropic's popular Opus 4.6 model at a reduced cost. MAI models are also available within GitHub Copilot, and a Microsoft-built transcription model will begin rolling out to Teams in the coming months, Suleyman said.

The move positions Microsoft as both a consumer and a competitor in AI, threatening the revenue outlook for OpenAI and Anthropic while potentially saving billions in annual procurement costs. Microsoft's stock has fallen nearly 20% year to date, the worst performer among the Magnificent Seven, as investors question the return on its massive AI investments.

Copilot Restructuring Targets Confusion and Costs

The model replacement is part of a broader reorganization of Microsoft's Copilot business. Executive Vice President Jacob Andreou, who joined last spring and now oversees more than 11,000 employees across Copilot, Bing, MSN and Edge, issued a 1,200-word internal memo announcing the merger of consumer and enterprise Copilot apps into a single product, according to The Information. Underperforming features including Copilot Podcasts and Copilot Labs will be shut down after failing to gain traction. Andreou acknowledged that Copilot's feature sprawl had "become an embarrassing problem internally" and caused user confusion, according to the memo.

User Growth Accelerates, But Gap With ChatGPT Remains Wide

Copilot's paid user base grew 33% to 20 million in the first quarter, up from 15 million in January, with pricing starting at $30 per employee per month. Microsoft management said Copilot has helped accelerate Office revenue growth in recent quarters. Yet the gap with rival OpenAI remains stark: ChatGPT has more than 50 million paid subscribers and roughly 1 billion monthly active users, compared with Copilot's estimated 38.5 million, according to Sensor Tower. Andreou said enterprise clients are scrutinizing AI return on investment more closely, adding that "the bar is rising across the entire enterprise software space."

Microsoft's in-house AI push could reshape the competitive dynamics of the enterprise AI market, valued at more than $200 billion. If MAI models prove cost-competitive at scale, the company could save billions in annual inference costs while reducing its dependence on OpenAI, with which it has a long-standing discounted partnership that is not indefinite. Microsoft is also establishing a $2.5 billion AI consulting unit, Microsoft Frontier Company, deploying 6,000 industry and engineering experts to help clients deploy AI systems.

This article is for informational purposes only and does not constitute investment advice.