Let's be fair. Microsoft has not succeeded at mainstream consumer AI products... yet.
To say AI failed at Micrsoft when CoPilot (the real one, for developers) was, last I heard, the most subscribed generative AI tool for software developers is not a failure. It's wild that most developers in a corporate environment pay Microsoft to use Chat GPT, Gemini, and Claude. Their other gen-AI components in Office, like Powerpoint and Word, are pretty darn good. But again, unless you're a corporate user in a work setting, you probably don't care.
This push to lease you your own computer is what hasn't worked very well so far. I dearly hope it pushes more people to Linux (though more likely they'll flee to Mac, which is a more palatable version of the clumsy crap MS is trying to do).
So consumer AI... perhaps that has failed. But the money isn't in you and me paying for a Windows license. The money's in big corporations paying for ten thousand seats at a time for their suites.