Microsoft Initiates Claude Code Licenses Termination

Claude Code was first made available by Microsoft in December, and thousands of its own developers were invited to use Anthropic’s AI coding tool daily. In an attempt to encourage project managers, designers, and other staff members to try coding for the first time, Claude Code has become rather popular within Microsoft over the last six months, according to sources. With the fact that Microsoft is currently getting set to reverse its campaign for Claude Code, it could be a bit too popular.

Tom Warren, a writer with TheVerge, is aware that Microsoft intends to eliminate the majority of its Claude Code licenses and encourage many of its developers to switch to Copilot CLI. Although Claude Code has been a well-liked addition, Microsoft’s new GitHub Copilot CLI coding tool, a command-line version of GitHub Copilot that works independently without the use of programming programs like Visual Studio Code, has been weakened by it.

He has been informed that by the end of June, Microsoft’s Experiences + Devices team, which comprises the engineers in charge of Windows, Microsoft 365, Outlook, Microsoft Teams, and Surface, will stop using Claude Code. According to sources, in order to avoid the deadline, developers are being advised to begin moving their workflows to GitHub Copilot CLI in the coming weeks.

Employees are being informed already by Microsoft that the decision is to use Copilot CLI as its primary agentic command-line interface tool across Experiences + Devices. However, sources inform Tom that there is also a financial component to this decision. Microsoft’s current fiscal year ends on June 30. A simple approach to reduce operational costs for the upcoming fiscal year, which begins in July, is to cancel Claude Code licenses. 

Rajesh Jha, executive vice president of Microsoft’s experiences and devices group, states in an internal memo obtained by Notepad, “He also said that when they started offering both Copilot CLI and Claude Code, their goal was to learn quickly, benchmark the tools in real engineering workflows, and understand what best supported their teams. ” He emphasised that Claude Code played a significant role in that learning. At the same time, Copilot CLI has given us something particularly significant: a product that we can directly shape with GitHub for Microsoft’s repos, workflows, security expectations, and engineering needs.” 

For Microsoft engineers, however, the move away from Claude Code is not that simple. In order to help designers and project managers prototype concepts, Microsoft had been encouraging its staff members without any prior coding skills to try out Claude Code. Additionally, Microsoft had initially anticipated that staff members would be able to use GitHub Copilot and Claude Code to compare the two and share feedback and comments.

In recent months, Microsoft’s own developers have preferred Claude Code over GitHub Copilot CLI, and there are still issues that need to be resolved between the two platforms. In an effort to reduce the GitHub Copilot gap, Microsoft reportedly contemplated purchasing Cursor in recent months. However, in order to support its AI goals and steer clear of potential regulatory scrutiny, Microsoft has begun investigating other AI businesses. 

“We are continuing to enhance Copilot CLI for Microsoft engineers in close collaboration with GitHub,” says Jha. Experiences + Devices will continue to play a major role in designing the product, and the GitHub team has already released major changes based on Microsoft input. Making Copilot CLI the greatest agentic coding experience for Microsoft engineers is a shared responsibility between GitHub and E+D leadership.

Copilot CLI will continue to provide access to Anthropic’s models as well as Microsoft’s internal models and OpenAI’s collection of models. Tom Warren is also aware that Microsoft intends to increase its investment in Copilot CLI in order to fully incorporate it into its own engineering operations. Prior to the removal of Claude Code, Microsoft is also urging developers to submit bug reports and comments on Copilot CLI. 

Earlier this year, Microsoft swiftly rose to the top of Anthropic’s clientele, and it has apparently been using the sale of Anthropic AI models to meet its own Azure sales targets. Additionally, Microsoft and Anthropic inked an agreement in November that gives Microsoft Foundry users access to Claude Sonnet 4.5, Claude Opus 4.1, and Claude Haiku 4.5.

The Foundry agreement won’t be affected by the decision to terminate Claude Code licenses, and Microsoft still prefers Anthropic’s Claude models in Copilot and Microsoft 365 apps because they are better at some jobs than OpenAI’s competitors. In order to include Claude Cowork’s technology in Microsoft 365 Copilot, Microsoft recently collaborated closely with Anthropic. 

Microsoft’s GitHub team is currently under pressure to enhance Copilot CLI and attempt to outperform Claude Code in the process. Last year, Microsoft informed me that 91% of its engineering teams were using GitHub Copilot; however, the utilization of Claude Code throughout the last six months has undoubtedly affected that figure. Microsoft’s current goal is to increase the use of GitHub Copilot and have its own engineers develop its own AI coding tool once more. 

In summary, several teams at Microsoft are being affected by a new mandate, with the Experiences + Devices team facing the biggest impact. This team is responsible for building key products like Windows, Microsoft 365, Outlook, Teams, and Surface. The main reasons for the change and transition include consolidating Microsoft’s internal AI tools and lowering licensing costs. The company also wants to promote its own integrated product ecosystem. 

According to a report from The Verge, there has been internal friction because many Microsoft developers preferred using Anthropic’s Claude Code over GitHub’s tool. The developers felt Claude Code was more capable of doing their daily work. Microsoft had originally granted internal access to Anthropic’s terminal-based tool back in December 2025. The tool was quickly adopted by a wide range of employees, including engineers, designers, and managers.