Microsoft has quietly reduced internal sales forecasts for its AI products, according to a report from The Information published this week. Salespeople are failing to meet Azure AI targets due to a lack of customer demand, the report claims. Microsoft denied the allegations but cannot dispute market share data showing Google Gemini growing at six times the rate of Copilot.
The Numbers Tell the Story
FirstPageSage's December 2025 AI market share report paints a troubling picture for Redmond. Microsoft Copilot holds 14.1% of the AI chatbot market with quarterly user growth of just 2%. Google Gemini sits close behind at 13.4% but is expanding at 12% per quarter.
At current trajectories, Gemini will overtake Copilot within months.
ChatGPT still dominates with 61.3% market share, but its 7% quarterly growth rate lags behind both Gemini and Anthropic's Claude (which grew 14% last quarter despite holding only 3.8% of the market).
OpenAI Partnership Shows Strain
Microsoft's AI strategy hinges on its investment in OpenAI, the company behind ChatGPT. That relationship is showing stress. OpenAI reportedly issued an internal "code red" last week after Gemini outperformed ChatGPT's best models in problem-solving benchmarks. Google's Nano Banana image generator has also surpassed OpenAI's DALLE.
OpenAI continues to lose money at what analysts call dangerous rates. The company is reportedly rushing to release GPT-5.2 this week to counter Gemini's momentum.
Google's Structural Advantages
The gap between the two tech giants extends beyond software quality. Google builds its own Tensor server chips for AI workloads. Microsoft depends on expensive NVIDIA hardware for its data centers.
Google also controls Android, giving Gemini a direct path to billions of mobile users. Microsoft has no equivalent distribution channel.
Windows Central's executive editor Jez Corden, who uses both ecosystems daily, notes the practical differences: "Basic stuff like the photo editing features on Google Pixel phones are lightyears beyond the abysmal tools found in the Microsoft Photos app on Windows."
He adds that Copilot 365 cannot perform tasks Gemini handles routinely, such as scheduling calendar events with natural language in mobile apps.
Not All Bad News
Microsoft has bright spots. GitHub Copilot has attracted over 15 million developers and represents a genuine success story in AI-assisted coding.
The company is also developing its own Maia and Cobalt chips to reduce dependence on NVIDIA. Whether these initiatives can ship fast enough to matter remains uncertain.
Microsoft reports Q2 FY2025 earnings on January 28, 2026, when investors will get updated figures on Azure AI revenue and Copilot adoption rates.
