No, they didn't buy GitHub to shut Atom down. But they did create VSCode to cut off GitHub's growing expansion of their business through Atom. They could have just extended Atom with Azure plugins etc, but instead they essentially forked it and poured tons of resources and hundreds of developers into it. That effort helped suppress the valuation of GitHub, so that they could buy it for cheaper (or at all?).

The revenue generating upsell for VSCode is already here and it IS GitHub Codespaces. They are going to add features you can't live without based off code synthesis (sky's really the limit here) and gate those off saying it can't run locally because it's too resource intensive. They'll charge you (or your company) by the second for all usage.

It would be much harder or impossible for them to do this if Atom and an independent GitHub had been further entrenching in this space for the last decade.

Many of the biggest developer tooling projects big corp are building now existentially threaten smaller developers and apps, by design.

Don't give Microsoft a pass here.