Microsoft missed AI wave, says ex‑VP

Microsoft is taking heat from a former insider at the same moment it is still trying to turn AI into a standard layer across Windows, Microsoft 365 and Azure. Mat Velloso, who spent more than a decade at Microsoft and later held AI product roles at Google DeepMind and Meta, said on May 17 that Microsoft had “missed the AI wave,” according to a report by Windows Latest. (windowslatest.com) The charge matters less as a consumer-tech jab than as an enterprise-software argument. Microsoft can still lose mindshare in AI while keeping a powerful grip on corporate buying because its products are already embedded in identity, productivity and infrastructure stacks. Microsoft said in December that Microsoft 365 apps reach more than 430 million people, and a Microsoft community post citing the company’s fiscal second-quarter 2026 results said Microsoft 365 commercial paid seats had passed 450 million. (microsoft.com) Velloso’s most pointed number was adoption. Microsoft said on its fiscal second-quarter 2026 earnings call that it had 15 million paid Microsoft 365 Copilot seats, a figure the former executive contrasted with a Microsoft 365 base of roughly 450 million commercial paid seats. That math yields about 3.3% penetration, the figure highlighted in the criticism. (microsoft.com) That does not prove enterprises are rejecting Microsoft outright. It shows that paid AI expansion inside large installed bases is slower than the company’s product ubiquity might suggest. In long enterprise sales cycles, buyers often separate “we already run Microsoft” from “we are ready to pay for this AI layer across the estate.” (windowslatest.com) Microsoft’s own recent product moves add context. On March 20, Pavan Davuluri, president of Windows and Devices, published a post titled “Our commitment to Windows quality,” promising a renewed focus on reliability and the day-to-day Windows experience. Windows Latest reported on May 7 that Microsoft had begun removing or renaming some Copilot-branded features in Windows apps, framing the shift as a pullback from more aggressive desktop AI placement. (blogs.windows.com) That retreat, if accurate, fits a broader pattern in enterprise technology. Companies with entrenched distribution usually win first on trust, procurement and integration, not on novelty. Microsoft still controls key layers that many IT departments cannot easily replace: Active Directory and Entra for identity, Azure for cloud infrastructure, Office for productivity, Teams for collaboration and Windows for endpoints. Even when a newer AI product gets more enthusiasm, deployment inside regulated or legacy-heavy environments often runs through those Microsoft-controlled systems. This paragraph’s point about Microsoft’s installed enterprise footprint is based on the company’s public product structure and commercial positioning. (microsoft.com) That is why the story is not simply “Microsoft failed at AI.” The more precise reading is that Microsoft may be facing a split outcome: weaker-than-hoped direct adoption for premium Copilot products, but continued leverage because enterprise customers still need AI to connect to identity, documents, security controls and existing workflows. Microsoft’s December pricing and packaging update for commercial Microsoft 365 suites, effective July 1, 2026, also shows the company is still folding more AI, security and management capabilities into the core bundle rather than backing away from enterprise monetization. (microsoft.com) For enterprise buyers, the leading indicator to watch is not just seat count. It is integration burden. If customers keep choosing products that plug cleanly into Microsoft directories, permissions, data stores and desktop workflows, Microsoft can remain central even if it did not define the AI wave in the way critics expected. That last point is an inference drawn from Microsoft’s installed-base advantages and the gap between total Microsoft 365 seats and paid Copilot seats. (techcommunity.microsoft.com)