Microsoft lowers AI software growth targets | Hacker News Reader

Microsoft lowers AI software growth targets

finance.yahoo.com

130 pointsramoz97 comments

I keep wondering how many things like this need to happen before the other shoe drops and the ring-around-the-rosie investment structure collapses. It's become very obvious that "AI" in its current form isn't going to turn a profit, at least not in the short term.

It won't happen. Too much $ had already been invested. It will work, one way or the other. It is here to stay.

The Internet was also "the new industrial revolution" and is here to stay... yet a lot of people lost their pants in the dot-com bubble.

I'm intrigued by this thought, and I'm not sure it's the right way to look at the current situation.

Think about it via a manufacturing analogy. I think we can all agree that modern cnc machining is much better for mass manufacturing than needing to hire an equivalent number of skilled craftspeople to match that throughput.

Imagine we had a massive runup of innovation in the cnc manufacturing industry all in one go. We went from cnc lathes to 2d routing tables to 3, then 4, then 5 axis machining all in the span of three years. Investment was so sloshy that companies were just releasing their designs as open source, with the hope that they'd attract the best designers and engineers in the global race to create the ultimate manufacturing platform. They were imagining being able to design and manufacture the next generations of super advanced fighter jets all in one universal machine.

Now these things are great at manufacturing fully custom one-off products, and the technicians who can manipulate them to their fullest are awestruck by the power they now have at their fingertips. They can design absolutely anything they could imagine.

But you know what people really want? Not fighter jets, but cheap furniture. Do you know what it takes to make cheap furniture? Slightly customized variants of the early iterations that were released as open source. Variants that can't be monitized by the companies that spent millions on designing and releasing them.

The tech might work great, but that doesn't mean the investment pays off with the desired returns.

People keep comparing LLMs (and AI, I suppose) to specialised machines like the printing press or the harvester or something, and often throwing in a luddite comparison.

The glaring difference is that specialised machines, usually invented to do an existing task better, faster or more safely, do indeed revolutionise the world. As you pointed out, they perform necessary functions better, faster, and / or more safely.

Note that segues, that weird juice machine etc, we not built to fill a gap or to perform a task better, faster or more safely. Neither were pet rocks or see-through phones. Nobody was sitting around before the Metaverse going 'man, I wish Minecraft could be pre-made and corporate with my work colleagues", and when these things launched the sales pitches were all about "look at the awesome things this tech can do, isn't it great?!", rather than "look at the awesome things this tech will allow you / help you to do, aren't they great?!".

LLMs are really impressive tech. So are segues and those colour-changing t-shirts we had in the 80s. They looked awesome, the tech was awesome, and there were genuine practical applications for doomerist, somewhere.

But they do not allow the average poison to do anything awesome. They don't make arduous tasks faster, better or safer without heavily sacrificing quality, privacy, and sanity. They do not fill a gap in anybody's life.

That's the difference. Most AI is currently a really cool technology that can do a bunch of things and it's very exciting to look at, just like the Segway and the Metaverse. And, really, an ant, or a furby. They are not going to revolutionise anything, because they were more built to. They weren't built to summarise your emails or to improve your coding (there are many princes of software that were built to assist with coding, and they are pretty good) or to perform any arduous or dangerous tasks. They were built to experiment, to push boundaries, to impress, and to sell.

So yes, I 100% agree with you and take your point a little further it's not even that LLM's are too high tech and fancy for most periods. I don't even think that they're products. They are components, or add-ons, being sold as products like extension power cables 50 years before the invention of the plug socket, or flexible silicone phone cases being sold in the era of landlines and phone boxes.

And I'm legit still baffled that so many people seem to have jobs that revolve around reading and writing emails or producing boilerplate code, who are not able to confidently do those things, but aren't just looking for a new job.

Like, it's a tough market, but if you haven't learned to skim-read an email by now, do yourself a favour and find a job that doesn't involve so much skim reading of emails. I don't get it.

AKA "too big to fail". The interests of major and early AI capital owners will be prioritized over those of the later capital and non-capital-owning public.

Things that are too big to fail can end up being nationalized when they do fail. That might not be a bad outcome.

I could see US-built AI being a national security concern.

> Things that are too big to fail can end up being nationalized when they do fail.

And if that happens, will the taxpayer be on the hook to make investors whole? We shouldn't. If it is nationalized, it needs to be done at a small fraction of the private investment.

When the government takes your property with eminent domain, they don't give you what you've put into it or what you owe, they give you the market value for the property.

If one or more of the AI companies fail, the government would pay what they feel is the market value for the graphics cards, warehouses, and standing desks and it will surely be way less than what the investors have put in.

that would be a bad outcome. why is the public responsible for the bubble chasing idiocy of evil megacorps?

they failed to grow their capital and they can hold the bag

Yes, that’s why we all do our meetings in the metaverse, and then return home on our segways to watch some 3d tv, while the robotic pizza making van delivers robot-made pizza.

Ultimately, you can spend what you want; if the product is bad people won’t use it.

Well at least one, because this one didn't happen.

https://www.cnbc.com/video/2025/12/03/microsoft-have-not-low...

Is "Microsoft Lowers AI Software Growth Targets as Customers Resist Newer Products" really "way different" than sales quotas? Or more to the point, a statement from Microsoft PR spinning it as "growth targets" doesn't prove they haven't also lowered sales quotas in some divisions.

Even if the Microsoft spokesperson is being completely honest, lower growth targets is still evidence of weakness in the AI bubble.

The "They" here are the folks who are currently investing in 'selling' AI solutions to other companies. OpenAI, Microsoft, Google's Gemini, and a slew of AI-backed startups are good examples.

They don't need AI to turn a profit.

They need AI to be seen as widely adopted and "a part of life".

They need certain categories of folks (CEOs, CIOs, Boards of Directors) to see AI as valuable enough to invest in.

They need to keep up the veneer of success long enough to make their investments attractive to acquisition by Private Equity or to an IPO.

They need to juice the short-term stock price.

Their goal isn't to produce a long-term business, their goal is to raise short-term returns to the point that the investors get a nice return on their investment, and then it becomes someone else's problem.

They filled the bag. They can hold it.

"How money works" YouTube channel had a nice video about this trend in particular going back to making stock buybacks legal in 1982 I think, which made CEO and execs wealth acquisition driven not by a long successful career with healthy margins and dividends, but a short-tenured local maximum pump-and-dump and a hold-the-bag game funded by endless fiat currency which is printed on the backs of other people. Other people's money , Gordon Gecko, they're not just real, they're celebrity sociopaths running us into the ground because of a fragile ego.

Oh it's gonna turn a profit to someone, especially when market cools down into "it's just a service making some things easier/more efficient" (and not "will replace all the expensive experts company needs, but never the people pushing for it in the company").

Just not whoever ends up with the bag of now far less valuable stock.

Along with the Xbox app and eye tracking software that took forever to get rid of (with many-many steps--that still got reinstalled with subsequent updates) out of my "Professional" Windows installation, having co-pilot embedded in every screen finally convinced me to switch to Linux--forever.

Have you switched, though? I hear people talking about it, but I doubt they stay the first time they need to configure WiFi. Get a MacBook.

I think your Linux knowledge might be out of date by about decade.

Well, unless someone gets recommended Arch Linux as a first Linux experience

Pfft, when was the last time you installed Linux, 1998? Nowadays it's all about getting audio to work ;)

I switched a month or two on my desktop. Then when that turned out good, I switched my laptop to Linux, too. No hardware issues on either one, and the WiFi on the laptop works just fine. (My desktop is connected by Ethernet.)

Linux is fine now, and has been for at least the past 5 years if not more. Even HiDPI works just fine now which has been a pain point for a while (at least, it works great on KDE).

That being said, my daily driver is macOS ever since apple silicon released, purely due to the laptop hardware. I keep a reasonably powerful Beelink mini PC mounted under my desk running ubuntu server and most of my work happens there over SSH with Tailscale. If you're primarily a laptop user, I'd definitely recommend this set up (or something similar), you get the best of both worlds.

It sounds like you haven't configured Wi-Fi on Linux in the last 10 or 15 years. It just works these days.

The MacBook I use for work sucks and has weird issues when it wakes up from sleep. I've started having to restart my computer to fix them. I can't remember the last time I've had to do that.

I built a new desktop PC last fall and every Linux distro I have tried this year has WiFi working out of the box. Contrast that with Windows where I need to keep the drivers on a USB stick so I can bootstrap myself on a fresh install

With MacBooks I'm over the premium on unfixable hardware.

I've been on NixOS full time for probably 1.5 years. 0 problems, other than some games that need kernel anti-cheat to run.

EDIT: I was also able to connect to my solar panel gateway trivially from the CLI just a few days ago.

I haven't had issue with WiFi on Linux in over a decade.

Sleep/Hibernate on the other hand; well, let's just say that fast boot times "solved" those issues.

Sleep is really most useful for laptops and I'm not sure fast boot really solves that use case as well as it does on a desktop (where you really never got as much out of sleep anyways since you're always plugged in).

Just like Windows 11 isnt Windows 95, Linux today isnt Linux from 1995. Even if you use Arch, with nothing configured, still in the install CLI its pretty much just: 'station wlan0 connect "SSID"' 'enter Password:*** ' Done and this is the worst case scenario, with arch, a minimalist distro, where most things arent there or configured by default.

raises hand As of this month, my Windows-only desktop gaming computer is now dual-boot, and I only boot back to Windows for a particular game.

The main pain-point was that the remote backup service had no Linux client. I ended up solving it with restic, but I acknowledge that isn't a turnkey solution for archetypal Aunt Tillie.

They got in trouble for tricking Office users into paying for AI-enabled plans they didn't actually want, and now they're all out of ideas.

“Tricking” or “forcing”?

I do not participate in the Microsoft ecosystem except only when needed. And every time I have to buy something on someone’s behalf, I can’t just buy or subscribe to The Thing, I have to get all of Office and cloud storage when all they need is an email box.

They forced all personal accounts to "upgrade" to more expensive AI plans, but the trick was that they presented the change as if it were a general price increase when the old plans actually still existed, albeit buried at the bottom of a chasm. The only way to revert back was to attempt to cancel your subscription at which point they'd relent and offer the non-AI plans again.

Then Australia slapped Microsoft over the head and forced them to apologize: https://news.microsoft.com/source/asia/2025/11/06/an-apology...

Where is AI actually selling and doing well? What's a good resource for these numbers? What are the smaller scale use-cases where AI is selling well?

I am generally curious, because LLMs, VLMs, generative AI, advances are proving useful, but the societal impact scale and at this the desired rate is not revealing itself.

Coding - e.g. Claude Code, Cursor both announced 1B revenue run rates.

Agreed, coding is one. What else?

Professional legal services seem to be picking up steam. Which sort of makes sense as a natural follow on to programming, given that 'the law' is basically codified natural language.

Except that it keeps getting lawyers into trouble when they use it.

https://www.reuters.com/legal/government/judge-disqualifies-...

Yeah, good point. These things never get better.

I don't know how it is in other countries, but in the UK using LLMs for any form of paid legal services is hugely forbidden, and would also be insanely embarrassing. Like, 'turns out nobody had any qualifications and they were sending all the work to mechanical Turks in third world countries, who they refused to pay' levels of embarrassing.

I say this as someone who once had the bright idea of sending deadline reminders, complete with full names of cases, to my smart watch. It worked great and made me much more organised until my managers had to have a little chat about data protection and confidentiality and 'sorry, what the hell were you thinking?'. I am no stranger to embarrassing attempts to jump the technological gun, or the wonders of automation in time saving.

But absolutely nobody in any professional legal context in the UK, that I can imagine, would use LLMs with any more gusto and pride than an industrial pack of diarrhoea relief pills or something - if you ever saw it in an office, you'd just hope it was for personal use and still feel a bit funny about shaking their hands.

sales, marketing, customer support, oh my, so many

Newsrooms, translation services.

Market size for this is in the billions though, not trillions.

it's easily a 200bn ARR business, if coding agent achieved another step jump in abilities ~ 1trn+ marketcap

> if coding agent achieved another step jump in abilities ~ 1trn+ marketcap

Do you want to walk us through that math?

I am running a container on an old 7700k with a 1080ti that gives me vscode completions with rag with similar latency and enough accuracy to be useful for boilerplate etc…

That is something I would possibly pay for but as the failures on complex tasks are so expensive, this seems to be a major use case and will just be a commodity.

Creating the scaffolding for a jwt token or other similar tasks will be a race to the bottom IMHO although valuable and tractable.

IMHO they are going to have to find ways to build a mote, and what these tools are really bad at is the problem domains that make your code valuable.

Basically anything that can be vibe coded can be trivially duplicated and the big companies will just kill off the small guys who are required to pay the bills.

Something like surveillance capitalism will need to be found to generate revenue needed for the scale of Microsoft etc…

Given how every CPU vendor seems to push for some kind of NPU, local running models will probably be far more common in next 5 years. And convincing everyone to pay subscription for very minimal improvements in functionality gonna be hard.

The NPUs integrated into CPU SoCs are very small compared to even integrated GPUs, much less discrete or datacenter GPUs.

NPUs seem to be targeted towards running tiny ML models at very low power, not running large AI models.

Have you documented your VSCode setup somewhere? I've been looking to implement something like that. Does your setup provide next edit suggestions too?

I keep idly wondering what would be the market for a plug and play LLM runner. Some toaster sized box with the capability to run exclusively offline/local. Plug it into your network, give your primary machine the IP, and away you go.

Of course, the market segment who would be most interested, probably has the expertise and funds to setup something with better horsepower than could be offered in a one size fits all solution.

Kinda like https://www.microcenter.com/site/brands/nvidia-dgx-spark.asp...?

Ooof, right idea but $4k is definitely more than I would be comfortable paying for a dedicated appliance.

Still, glad to see someone is making the product.

I am working on a larger project about containers and isolation stronger than current conventions but short kata etc…

But if you follow the podman instructions for cuda, the llama.cpp shows you how to use their plugin here

https://github.com/ggml-org/llama.vscode

That would be meaningful if they weren’t losing money to generate that revenue.

The product works and saves enough human effort to justify the real cost. People will eventually pay when it comes down to it.

If that were the case, why not charge more?

Because they're loss-leading like all their competitors for now

you can check on trustmrr.com (mostly indie/solo businesses) that a large chunk of those smaller companies make money by selling AI video generation and other genAI services.

Most of my family uses ChatGPT instead of Google to answer questions, despite my warnings that it’ll just make stuff up. I definitely Google much less now than I used to, directing a fair amount of that into ChatGPT instead.

But how much are you paying for these services?

My family? Same as they pay for Google

that's frankly mostly because google search got so massively worse... I'd still use google more if not for the fact the stuff I asked it 5 years ago and got answer no longer provides useful answers

I don't use it, but I know several people who use ChatGPT to edit emails etc. so they don't come across nasty. How well it works, I can't say.

You´d think after Clippy and Windows 7, they´d take the clue and stop producing software that creates friction for users, instead of removing it?

You mean Vista. Windows 7 was perfect. Till it was ruined by what shall not be named.

What ruined windows 7?

Windows 8.

(yes, hardly anybody remembers that there was a Windows version between 7 and 10 - but it did exist, I'm not making it up, saw it with me own eyes on a coworker's PC once).

Is 8 where they leaned heavily into touch screen boxes?

Yes. As if it wasn't out of touch enough, they even did it on the server version as well!

Considering Windows 7 (if you count ESM) was supported all the way up to 2020, it's no wonder people skipped 8 (start menu tiles aside). It was a weird release schedule, and it was split into two versions 8 and 8.1, with 8 only having like 3 years of main stream support, and no ESM and 10 released just two years after 8.1.

If you count paying for ESM, someone could have gone from XP->7->11 and still been within support the whole time. Or from vista straight to 10.

Fun fact: Windows for Workgroups 3.11 was supported all the way to 2008. I believe it was the longest supported version of Windows.

Nah, I still have my boxed Windows 8 Pro on my shelf. The key used to activate Windows 10, maybe even 11, but last I tried it didn't work anymore.

I would even say there were two Window versions between 7 and 10, namely, 8 and 8.1.

Not really. They started doing the "easy-to-use" alternative configuration panels in Vista. Windows Vista also started requiring driver signatures, making it impossible to write your own device drivers without going into the ugly test mode on every boot.

Windows XP was the pinnacle, with everything working just as it should.

XP SP 2

I think I meant whatever came after WinXP which I recall was the last solid version. Either way, I sort of switched to Linux in those years and never looked back again...

> it was ruined by what shall not be named.

what does lorraine williams have to do with this?

Both examples were great, beloved products.

Per CNBC, MSFT is denying this report...

https://x.com/amitisinvesting/status/1996245002930753760?s=2...

title fixed per microsoft correction

No wonder if Microsoft failed to deliver a single AI tool that adds value.

I meet with enterprise clients who explore things like Copilot Studio.

Microsoft platforms move too slowly too keep up with innovation pace, and suffer from classic platform restriction in regards to building useful, relevant, and *reliable* integrations into business systems.

My advise is to always start from scratch with AI, e.g. "build your own agent" and focus intimately on the rules/guardrails and custom tools you need for that agent to create value. A platform can't do that for you in current day.

MSFT needs to stay focused on O365 and coding tools with very simple UX wins. Not introduce custom agent platforms and auto-embed intrusive agents where no one asked for them.

Microsoft's Power Platform should be a big advantage. If you already have your data in Outlook/SharePoint, the PowerPlatform makes it easy to access. Unfortunately I've encountered several roadblocks deploying CoPilot Studio & Power Platform for my enterprise. Note: I'm using GCC, so everything is worse than normal.

1) Incomplete integration. Often I just want to write a prompt to create structured data from unstructured data. e.g. read an email and create a structured contact record. There's a block for this in Power Platform, but I can't access it. Studio can do this pretty well, but...

2) CoPilot Studio sucks at determinism. You really need to create higher level tools in Power Automate and call them from Studio. Because of (1) this makes it hard to compose complex systems.

3) Permissions. We haven't been able to figure out a secure way for people to share Copilot Studio agents. This means you need to log into studio and use the debug chat instead of turning the agent on in the main Copilot interface.

4) IDE. Copilot Studio bogs down real fast. The UI gets super laggy, creating a terrible DX. There should be a way to write agents in VScode, push the definitions to source control, and deploy to Copilot, but it isn't obvious.

5) Dumb By Default. The Power Platform has hooks into Outlook and Active Directory. Copilot has access to the latest OpenAI models. CoPIlot Studio has an MCP server for Calendar. Out of the box I should be able to tell CoPilot "schedule a 30min meeting with Joe and Larry next week." Nope. Maybe if I struggle through CoPilot Studio to create an agent? Still no. WTF Microsoft.

I guess I'll stop there. I really wanted to like Copilot studio, but it just didn't deliver. Maybe I'll circle back in a couple months, but for now I'm exploring other platforms.

PS don't even get me started on how we were so excited to retire our home-grown chat front end for the Azure OpenAI Service in favor of Copilot, only to have our users complain that Copilot was a downgrade.

PPS also don't talk to me about how CoPilot is now integrated into Windows and SIGNS YOU INTO THE FREE COMMERCIAL SERVICE BY DEFAULT. Do you know how hard it is to get people to use the official corporate AI tools instead of shadow AI? Do you know how important it is to keep our proprietary data out of AI training sets? Apparently not.

Not to give "AI" too much credit here, but I wonder what was the last time MS built a value delivering product in the first place

Well they've been making improvements to Notepad, like now it has tabs, and you can close it without saving a single one, sort of how I used Sublime Text for note tracking.

Wow. I had no idea. Last time I used windows was probably 13 years ago...

And it has AI now, too. Are those really improvements or change for the sake of change? https://www.youtube.com/watch?v=bmBd39OwvWg

Oh yuck

It depends on your perspective on value. MS stock and lobbying, money bags, and government/corporate capture have provided unfathomable value.

VSCode? Even if some peeps don't like it out of principle because it's an Electron app, it's undeniable that it is extremely popular (...and is actually a lot more lightweight and snappier than 'real' IDEs like VStudio or Xcode, or the various Java-based IDEs).

Also indirectly: DirectX saved Linux gaming ;)

> Also indirectly: DirectX saved Linux gaming ;)

Nah, if windows stayed with OpenGL instead of inventing its own, gaming on linux would be far easier for decades.

But it is a bit funny that win32 api turned out to be most stable way to make apps running on linux

> Nah, if windows stayed with OpenGL instead of inventing its own, gaming on linux would be far easier for decades.

The problem with OpenGL is that it is a complete mess compared to the D3D APIs (D3D was the better designed API since at least D3D9, arguably even D3D7). Also DirectX wasn't just about rendering, it also covered sound, input and networking - although most of that has been dissolved into regular Windows APIs since quite a while).

Also, Vulkan repeats some of the same problems that OpenGL had, but at least Vulkan is an uptodate mess, not a deprecated mess like GL.

Not surprised. Just bought a office 365 sub that comes with 60 AI tokens. Cool so tried to figure out what that means.

Answer - 60 shots of generation/summarization etc per month. ie way below even casual use.

Ok so maybe the copilot chat works well if I’m logged in with my paid account then? Nope. Slow and often generates empty code cells. (The enterprise version at work never has issues).

ie between low quota and broken tech their consumer level office AI is literally of no use to me.

The submitted article was magically updated by Reuters midday with a new headline:

Microsoft denies report of lowering targets for AI software sales growth

Copilot is so useless compared to the rest, using Windows really is like trying to evade having shit smeared in your face all the time.

Reply on news.ycombinator.com