It\u2019s a move that seemed likely ever since Amazon announced its $50 billion deal<\/a> with OpenAI earlier this year, which was originally framed as a deal to make AWS a third-party provider of OpenAI Frontier, together with some collaborative work on custom models for Alexa. Microsoft wasn\u2019t happy about OpenAI cutting a deal with its main rival, and it was weighing legal action<\/a> ahead of this renegotiation.<\/p>\n Amazon and OpenAI clearly wanted a closer partnership, especially as Amazon is playing catch-up in the AI market and trying to push agents to businesses through its Bedrock service. OpenAI told its employees earlier this month<\/a> that its deal with Microsoft \u201chas also limited our ability to meet enterprises where they are \u2014 for many that\u2019s Bedrock.\u201d Ouch.<\/p>\n As much as Microsoft will hate seeing OpenAI models being available to Amazon, it now stands to benefit from OpenAI cozying up to its rival. Sources tell me that as part of the amended agreement, Microsoft will continue to receive 20 percent of the revenue OpenAI earns for ChatGPT and the AI startup\u2019s API platform. This also includes a cut of any revenue OpenAI earns from putting its products and services on rival cloud platforms like AWS. There\u2019s a revenue cap, but this seems mutually beneficial for both Microsoft and OpenAI even if the Amazon deal originally angered Microsoft.<\/p>\n Microsoft will remain \u201cOpenAI\u2019s primary cloud partner\u201d and ship OpenAI\u2019s latest products first on Azure, but the lack of exclusivity now means OpenAI\u2019s new models can ship minutes later to rival cloud platforms. I wouldn\u2019t be surprised to see OpenAI\u2019s models also appear on Google\u2019s Gemini Enterprise Agent Platform service in the future.<\/p>\n That gives Microsoft less of an advantage over its rivals, particularly for its Azure OpenAI service and its Foundry efforts. Microsoft\u2019s non-exclusive license for OpenAI models and products will now last through 2032, a two-year extension over the previous 2030 cutoff date.<\/p>\n The revenue sharing is also one way now, so Microsoft no longer has to pay 20 percent of its Azure OpenAI revenue back to OpenAI. This new deal also means Microsoft won\u2019t be paying a revenue share to OpenAI if its search and news advertising revenue grows by 15 percent year over year. Microsoft still owns around 27 percent of OpenAI\u2019s for-profit arm, too, making it a major shareholder in OpenAI\u2019s future growth.<\/p>\n This amicable split but not-a-split has only been made possible because Microsoft\u2019s access to OpenAI models is no longer tied to a clause about artificial general intelligence<\/a> (AGI), something that has long dictated OpenAI and Microsoft\u2019s partnership. The removal of the AGI clause means Microsoft will no longer lose access to OpenAI\u2019s most advanced future models once AGI is theoretically reached. And on the flip side, OpenAI is no longer incentivized to declare AGI to get out of the deal.<\/p>\n The pair had been arguing about the AGI clause for well over a year, and things got particularly heated when OpenAI was considering a $3 billion deal to buy AI coding tool Windsurf last year. OpenAI wanted Windsurf to be exempt from the deal with Microsoft, and even reportedly considered<\/a> accusing Microsoft of anticompetitive behavior. OpenAI eventually backed down on its Windsurf acquisition plans, but sources at Microsoft tell me it led to months of tense negotiations over OpenAI\u2019s controversial for-profit restructuring<\/a> last year.<\/p>\n I understand Microsoft first became wary of OpenAI as a partner when Sam Altman was ousted as CEO in 2023<\/a> by the nonprofit\u2019s board of directors. This wariness led to Microsoft CEO Satya Nadella recruiting DeepMind cofounder<\/a> Mustafa Suleyman to lead its Microsoft AI business. Altman was reportedly<\/a> \u201cangered\u201d that Suleyman had joined Microsoft, especially as Suleyman\u2019s team started dealing directly with OpenAI engineers.<\/p>\n The tension between Suleyman\u2019s teams and OpenAI came to a boiling point<\/a> when Microsoft\u2019s AI chief yelled at former OpenAI CTO Mira Murati during a meeting in 2024, reportedly demanding<\/a> access to OpenAI code. While Microsoft cofounder Bill Gates, CTO Kevin Scott, and Nadella had all delicately brought the OpenAI deal to life<\/a>, Suleyman was hired to shake things up and create Microsoft\u2019s own AI models so that in the future it\u2019s less reliant on OpenAI.<\/p>\n Parts of these deal changes also seem designed to distance Microsoft from the chaos of OpenAI and Sam Altman. OpenAI is increasingly juggling public controversies, strategy shifts, and a slew of executive reshufflings. It certainly feels like the vibes are off<\/a>, and the contract update comes in the same week that Elon Musk and Altman are in court battling<\/a> over the future of the AI company. Microsoft has already started getting dragged<\/a> into this drama.<\/p>\n Away from the courtroom antics of Musk and Altman, Microsoft is still quietly trying to build models good enough to replace OpenAI\u2019s. It\u2019s had some impressive results with models like MAI-Transcribe-1<\/a>, a speech-to-text model that works across 25 different languages. But most of Microsoft\u2019s own AI models have been very task specific or smaller in size compared to OpenAI\u2019s large language models.<\/p>\n To make up for this gap, Microsoft is increasingly turning its attention to options from Anthropic<\/a> that are more powerful than OpenAI\u2019s models for certain tasks. Sources at Microsoft tell me the company has even considered using Google\u2019s Gemini models for certain products, just like how it rapidly started trialing<\/a> Anthropic\u2019s Claude Code.<\/p>\n Microsoft is willing to use the best AI model for the job, in an effort to keep businesses hooked to its enterprise software offerings and fend off competition from AI startups and even OpenAI itself. Some of the tension throughout Microsoft and OpenAI\u2019s partnership has been related to the collision course the pair have both been on, each trying to convince the same mutual customers to purchase their AI services.<\/p>\n All this points toward Microsoft\u2019s AI future as a mix of models developed internally and by OpenAI, Anthropic, and others. It leaves Microsoft and OpenAI with a partnership that\u2019s a lot more about finances than close collaboration on the future of AI. They\u2019ll still be closely linked, but the partnership-turned-situationship is looking a lot less complicated than before.<\/p>\n Microsoft brings Xbox back, scraps Microsoft Gaming. Just days after announcing an Xbox Game Pass price cut, Xbox CEO Asha Sharma revealed to employees that Microsoft Gaming is now returning to just Xbox<\/a>. Microsoft originally switched branding to Microsoft Gaming at the same time it announced its plan to acquire Activision Blizzard in 2022. Phil Spencer was promoted to Microsoft Gaming CEO at the time, but Sharma is now reverting those changes. \u201cXbox needs to be our identity,\u201d said Sharma to Xbox employees.The \u201cWe Are Xbox\u201d rallying of the troops. Alongside Microsoft Gaming returning to just Xbox, Sharma and Xbox chief content officer Matt Booty sent a joint memo to Xbox employees<\/a> laying out their vision for the future of Xbox. \u201cWe Are Xbox\u201d was the message, rallying Xbox employees to focus on the frustrations of players. Xbox will now be judged on daily active players and the priorities of hardware, content, experience, and services. Sharma has only been in the job for a couple of months, but she\u2019s certainly starting to make her mark<\/a>. There are still plenty of big questions over how her strategy will be different from the previous Xbox leadership, particularly when it comes to a renewed console focus and questions around game exclusivity.Xbox has a new logo. As part of Sharma\u2019s all-hands, Microsoft started showing off a new Xbox logo<\/a> on its campus this week. The logo has more of a glassy, transparent look, and I understand Microsoft has also been using this new design for some of its internal Project Helix materials. Microsoft has also plastered the \u201creturn of Xbox\u201d slogan on the walls of its Xbox offices this week, along with \u201cgreat games\u201d and \u201cfuture of play.\u201dGitHub had another major outage. In last week\u2019s Notepad issue I reported on employee concerns about GitHub reliability, and then hours later GitHub had a major outage<\/a>. It was a particularly bad one, thanks to a bug that randomly reverted previously merged commits (code snapshots). Then on Monday GitHub had a search-related outage. GitHub CTO Vladimir Fedorov admitted that \u201cboth of those incidents are not acceptable,\u201d in a blog post<\/a> promising more transparency for incidents. It seems like GitHub is struggling to scale with the increased demand of AI development workflows, and it\u2019s stressing all of its systems. I suspect the migration to Azure is also adding some complexity in the short-term, too.Microsoft will let you pause Windows Updates indefinitely, 35 days at a time. Windows 11 users won\u2019t be forced to apply a Windows update in the middle of a game or during busy work. Microsoft is rolling out a lot of changes to Windows Update<\/a>, including the ability to delay updates indefinitely at up to 35 days at a time. That means you\u2019ll soon be able to pause updates for a 35-day window and keep re-pausing them at the end of that 35-day window. I think it makes sense that Microsoft won\u2019t let people turn off Windows Update altogether, but there\u2019s a lot more flexibility on the way to make it less annoying.Leak reveals new Xbox Game Pass \u2018Starter Edition\u2019 that\u2019s part of Discord Nitro. Microsoft started teasing a mysterious Discord and Xbox Game Pass partnership last week, and a new leak has uncovered details on an Xbox Game Pass \u201cStarter Edition\u201d<\/a> that will be bundled with Discord Nitro. The Starter Edition reportedly includes \u201caccess to over 50 games from the Game Pass library,\u201d as well as 10 hours a month of Xbox Cloud Gaming streaming and the ability to earn Xbox Rewards points while playing games. Titles like Stardew Valley, Grounded, and Fallout 4 will be included, and we\u2019re now waiting on Microsoft to make this new tier official.Microsoft Office can now be controlled with Logitech\u2019s MX Creative Console. Logitech now has a suite of productivity plug-ins for its MX line of accessories, including its Stream Deck alternative. Shortcuts and actions for Word, Excel, and PowerPoint will all be available on the buttons of the MX Creative Console<\/a>, making it easier to pin favorite Office tasks instead of having to find them in the Ribbon.Microsoft is giving its Xbox employees an Xbox email address. After scrapping Microsoft Gaming and promising Xbox employees that \u201cWe are Xbox,\u201d Microsoft is now giving its Xbox employees an Xbox email address<\/a>. The new Xbox email address will replace an existing @microsoft.com address as the default way to send new emails, and employees will be able to opt out and keep their Microsoft email address as the default send-from address instead. It\u2019s a small and subtle change that\u2019s being made as part of \u201cstrengthening the Xbox identity inside and outside of Microsoft,\u201d according to an internal Xbox memo seen by The Verge. Activision and Bethesda employees also use their own domain for emails, but this change allows the broader Xbox team to have a similar appearance in emails to partners and developers.GitHub rushed to fix a critical vulnerability in less than six hours. While there are ongoing concerns about GitHub reliability, engineers at Microsoft rushed to fix a critical vulnerability last month<\/a> in less than six hours. Wiz Research used AI models to uncover a vulnerability in GitHub\u2019s internal git infrastructure that could have allowed attackers to access millions of public and private code repositories. GitHub\u2019s engineering team developed a fix and deployed it just over an hour after identifying the root cause, protecting both GitHub.com and GitHub Enterprise Server.Microsoft reports sinking Xbox revenue as its cloud business climbs. Microsoft reported its Q3 2026 fiscal earnings<\/a> this week, and its Xbox gaming division took a hit this time around. Xbox hardware revenue was down 33 percent, Xbox content and services revenue was down 5 percent, and overall gaming revenue was down 7 percent. Microsoft CEO Satya Nadella reflected on the recent Xbox leadership changes and renewed focus on Windows in an earnings call, saying the company is making an effort to \u201cwin back fans across Windows, Xbox, Bing, and Edge.\u201d Sharma also took to X<\/a> to admit that \u201cplayer and revenue growth has not yet met our ambition,\u201d and that \u201cWe know we have work to do to earn every player today and into the future.\u201d Outside of consumer, Microsoft\u2019s cloud business continues to flourish, with the company reporting $54.5 billion in revenue, marking a 29 percent year-over-year increase. Microsoft 365 Copilot saw growth as well, with paid seats jumping from 15 million in the previous quarter to 20 million.GitHub Copilot is moving to usage-based billing. All GitHub Copilot plans are moving to usage-based billing in June<\/a>. That means every Copilot plan will include a monthly allotment of GitHub AI Credits, with the option to purchase more. \u201cUsage will be calculated based on token consumption, including input, output, and cached tokens, using the listed API rates for each model,\u201d says Mario Rodriguez, chief product officer at GitHub. It\u2019s a controversial change, but it\u2019s part of the ongoing AI money squeeze<\/a> where we\u2019re starting to see companies introduce ads, rate limits, or feature restrictions in a bid to get more people paying for AI services.Outlook gets a Copilot upgrade. Microsoft is upgrading its Copilot integration in Outlook to make it more agentic<\/a>, so Copilot can triage emails, reschedule meetings, and more. The most interesting change is allowing Copilot to fully manage your calendar and resolve conflicts or prioritize meetings. This is something that\u2019s typically a full-time job for many executive assistants, and Copilot will still need to be prompted to manage this side of a calendar properly.<\/p>\n I\u2019m always keen to hear from readers, so please drop a comment here, or you can reach me at notepad@theverge.com<\/a> if you want to discuss anything else. If you\u2019ve heard about any of Microsoft\u2019s secret projects, you can reach me via email at notepad@theverge.com<\/a> or speak to me confidentially on the Signal messaging app, where I\u2019m tomwarren.01<\/a>. 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