Microsoft has begun canceling licenses for Anthropic's Claude Code, a popular AI coding tool, and is pushing thousands of its developers to switch to GitHub Copilot CLI instead. The move, which affects the company's Experiences + Devices team, is expected to be completed by the end of June, aligning with the end of Microsoft's current financial year.

Claude Code, which Microsoft first opened up to employees in December, quickly became a favorite among project managers, designers, and even first-time coders. It allowed non-engineers to prototype ideas and helped thousands of staff experiment with coding. Over the past six months, the tool gained such traction that it began to undermine Microsoft's own GitHub Copilot CLI, a command-line version of GitHub Copilot designed for developer workflows outside of traditional IDEs like Visual Studio Code.

Rajesh Jha, executive vice president of Microsoft's experiences and devices group, acknowledged the popularity of Claude Code in an internal memo, stating that it was 'an important part of that learning.' However, he noted that Copilot CLI offers something 'especially important: a product we can help shape directly with GitHub for Microsoft's repos, workflows, security expectations, and engineering needs.' The memo was reviewed by Notepad, a publication covering Microsoft.

The decision is not purely technical. Sources inside Microsoft indicate that cutting Claude Code licenses is an easy way to reduce operating expenses as the new fiscal year begins in July. The financial year at Microsoft ends on June 30, making the timing convenient for cost-saving measures. While Claude Code was available to thousands of developers, the company is now encouraging engineers to transition their workflows to Copilot CLI over the coming weeks, ahead of the cutoff.

This shift comes despite the fact that many Microsoft developers have favored Claude Code over Copilot CLI in recent months. The internal feedback from comparing the two tools revealed gaps that Copilot CLI still needs to address. Microsoft had even considered acquiring Cursor, another popular AI coding assistant, to help close the gap, but reportedly shifted focus to other startups to avoid regulatory scrutiny.

Jha's memo stressed that Microsoft is 'partnering closely with GitHub and continue to improve Copilot CLI for Microsoft engineers.' He added that the GitHub team has already shipped significant improvements based on Microsoft feedback, and that Experiences + Devices will remain closely involved in shaping the product. This is a shared accountability across GitHub and E+D leadership: to make Copilot CLI the best agentic coding experience for Microsoft engineers.

Anthropic's AI models will not disappear entirely from Microsoft's ecosystem. The Claude models will remain accessible through Copilot CLI, alongside internal-only Microsoft models and OpenAI's range of models. Microsoft also continues to have a strong partnership with Anthropic, including a deal signed in November that allows Microsoft Foundry customers to access Claude Sonnet 4.5, Claude Opus 4.1, and Claude Haiku 4.5. The cancellation of Claude Code licenses does not affect this Foundry deal.

Microsoft has been one of Anthropic's top customers this year and has even counted selling Anthropic AI models toward its own Azure sales quotas. The company also recently integrated technology behind Claude Cowork into Microsoft 365 Copilot, showing that the relationship remains deep. However, the internal push toward Copilot CLI reflects a strategic desire to control the most important AI development tool for its own engineering workforce.

GitHub Copilot has been widely adopted inside Microsoft: the company said last year that 91 percent of its engineering teams were using it. But the six-month experiment with Claude Code eroded that number, as many engineers preferred Anthropic's tool. Now, Microsoft aims to reverse that trend and bring its own developers back to its own product. The pressure is on GitHub's team to make Copilot CLI surpass Claude Code in functionality and user experience.

This move is part of a broader pattern of Microsoft's AI strategy. The company has invested heavily in OpenAI and Anthropic, but it also seeks to build its own AI tools for internal use and for customers. Copilot CLI is the latest iteration of that effort, designed to work seamlessly with Microsoft's own repositories, security protocols, and engineering workflows. By consolidating on one tool, Microsoft hopes to reduce costs, streamline feedback, and improve its product for external users.

The transition may not be smooth. Engineers who have grown accustomed to Claude Code's features will need to adapt, and Microsoft is actively encouraging them to file bug reports and feedback on Copilot CLI to accelerate improvements. The company is also investing more in Copilot CLI to ensure deep integration into its engineering processes. Whether these steps will be enough to win over skeptical developers remains to be seen.

This development was first reported by Notepad, a newsletter from The Verge, but Microsoft has not made a public announcement. The internal memo from Jha indicates that the company is committed to making Copilot CLI the primary agentic coding interface for its developers. The end of June deadline marks a clear transition point, and the next few months will be critical for GitHub's team to deliver on its promises.

Source: The Verge News