Cursor has been trying to do things to reduce the costs of inference, especially through context pruning. For instance, if you "attach" files to a conversation, Cursor no longer stuffs the code from those files into the prompt. Instead, it'll run function calls to open those files and read bits and pieces of the code until the model feels it has enough information. This seems like a perfectly reasonable strategy until you realize you cannot do the same thing with reasoning models, if you're limiting the reasoning to just the initial prompt.
If you prune out context from the initial prompt, instead of reasoning on richer context, the llm reasons only on the prompt itself (w/ no access to the attached files). After the thinking process, Cursor runs function calls to retrieve more context, which entirely defeats the point of "thinking" and induces the model to create incoherent plans and speculative edits in its thinking process, thus explaining Claude's bizarre over-editing behavior. I suspect this is why so many Cursor users are complaining about Claude 3.7.
On top of this, Cursor has every incentive to keep the thinking effort for both o3-mini and Claude 3.7 to the very minimum so as to reduce server load.
Cursor is being hailed as one of the greatest SAAS growth stories but their $20/mo all-you-can-eat business model puts them in such a bad place.