Microsoft's ambitious AI push is hitting some unexpected turbulence. The company, which has been positioning its Copilot assistant as a central part of its artificial intelligence strategy, is reportedly scaling back sales targets after struggling to find the enthusiastic adoption it anticipated.
According to multiple reports, Microsoft has cut sales targets for its agentic AI software by as much as 50% in some cases. The Information first reported that the company is adjusting expectations downward because, frankly, not enough people are buying these tools. And the reason for that lack of interest? Apparently, very few users actually find them useful enough to integrate into their daily workflows.
Microsoft isn't just competing against itself here. While the company has a serious stake in OpenAI and benefited from early access to its models, the broader AI assistant market is becoming increasingly crowded and competitive. OpenAI's ChatGPT commands over 61% of the market, while Google's Gemini is now less than 1% behind Microsoft's 14% share with Copilot.
What makes Google's position particularly interesting is that Gemini saw 12% growth over the last quarter, suggesting it's well on its way to becoming the real second-place alternative to ChatGPT. That leaves Microsoft's Copilot in a precarious third position, despite being baked directly into Windows and Microsoft 365.
The timing of this adjustment is notable. Tests from earlier this year found that AI agents failed to complete tasks up to 70% of the time, making them almost entirely redundant as workforce replacement tools.
While Microsoft positions Copilot as a tool for skilled employees to be more productive and save time on low-level tasks, the reality seems to be that the technology isn't quite ready for prime time in many business contexts.
Microsoft has pushed back against some of the reporting, with a spokesperson telling The Information that the story "inaccurately combines the concepts of growth and sales quotas" and that "aggregate sales quotas for AI products have not been lowered." However, the fact that these discussions are happening at all suggests there's a gap between Microsoft's ambitious AI vision and current market reality.
The company's AI strategy has been multifaceted, with Copilot appearing not just in Office applications but also as a physical button on Windows keyboards and even as an unremovable app on some LG smart TVs. This aggressive push into every possible interface might be part of the problem, when you're everywhere, you risk being seen as intrusive rather than indispensable.
Microsoft's situation reflects a larger industry challenge. While AI adoption has more than doubled in the workplace according to a Gallup survey, with 45% of workers now using AI at least a few times a year compared to 21% in 2023, daily usage remains relatively small at just 10%.
The most popular AI tools are still chatbots like ChatGPT and Gemini, not the integrated workplace assistants that Microsoft is betting on.
For Microsoft, which has invested billions in AI development and partnerships, this moment represents a critical test. The company needs to demonstrate that Copilot isn't just another feature but a genuinely transformative tool that justifies its premium pricing and integration across Microsoft's ecosystem.
With Google's Gemini gaining ground and ChatGPT maintaining its dominant position, Microsoft can't afford to lose momentum in a market where early leadership often translates to long-term dominance.
The coming months will be telling. If Microsoft can refine Copilot's capabilities, improve its reliability, and demonstrate clearer value to businesses, it might regain its footing. But if adoption continues to lag behind expectations, the company may need to rethink not just its sales targets but its entire approach to AI integration in the workplace.
