Author: Danielle

This has been a pivotal 12 months for Microsoft, a year in which it faced increasing competition that threatened to knock the company off its perch as the world’s leader in AI. Even so, Microsoft managed to add about $400 billion to its valuation this year, pushing it to about $3.5 trillion, depending on the day. 

And it kept its lead in AI.

How did it manage to do so? These five big events all helped shaped the company this year.

Donald Trump takes office

Ever since Microsoft was sued by the federal government in the late 1990s for antitrust violations, the company has tried to steer clear of politics, considering it the third rail of the business world. But US President Donald J. Trump rules by whim and a powerful sense of grievance. So, Microsoft can no longer escape politics — Trump won’t allow it.

The way CEO Satya Nadella dealt with Trump’s inauguration last January was a template for the way the wary company dealt with Trump the entire year. It steered a path between not offending him and not being a cheerleader either.

Microsoft donated $1 million for Trump’s inauguration. But Nadella didn’t attend the event like so many other tech leaders, including Amazon’s Jeff Bezos, Apple’s Tim Cook, Meta’s Mark Zuckerberg, OpenAI’s Sam Altman, Alphabet’s Sundar Pichai and Tesla’s Elon Musk. 

The donation seemed to appease Trump, even though Nadella didn’t show up in person. At least, it did for a while.

Trump targets Microsoft

In September, Trump put Microsoft in his crosshairs when he demanded the company fire its recently appointed President of Global Affairs, Lisa Monaco. Monaco was once second in command at the Justice Department and oversaw prosecutions of Trump for misusing classified documents and efforts to overturn the 2020 presidential election. The demand was part of a revenge-and-retribution campaign in which the president also targeted former FBI Director James Comey and New York Attorney General Letitia James, among others.

For Microsoft, this wasn’t about profit and loss; it was about company culture. Microsoft had already refused to shut down its diversity efforts and it dropped the law firm of Simpson Thacher & Bartlett when it pledged to give the administration $125 million in free legal work after threats from Trump. To replace the firm, Microsoft hired Jenner & Block, which sued the Trump administration instead of giving in to its threats.

With Monaco, though, Trump called out Microsoft individually for the first time. Nadella’s response: He didn’t say a word about Trump’s threat. And he didn’t fire Monaco. Microsoft kept its culture intact. Trump has yet to take revenge. 

Microsoft and OpenAI sign divorce papers

This year, Microsoft and OpenAI finally inked a deal clarifying what Microsoft will get in return for having invested nearly $14 billion in OpenAI, and what strictures, if any, OpenAI must adhere to because of that investment. Most importantly, it laid out what their relationship will be now that AI has conquered the tech world.

OpenAI got what it wanted most — it will be allowed to restructure itself in a way that essentially turns it into a for-profit company. That opens the way towards getting the $22.5 billion SoftBank has pledge to invest in the company, along with other investments.

In addition, OpenAI can make infrastructure deals with other companies without granting Microsoft the right of first refusal. OpenAI can also continue to develop AI-based consumer hardware and Microsoft gets no rights to the technology.

In return, Microsoft gets 27% ownership of the for-profit OpenAI business, estimated to be worth about $135 billion for now; that’s a pretty solid return on investment for a less-than $14 billion investment.

OpenAI also commits to buying $250 million from Microsoft in Azure cloud services. Microsoft gets to keep its intellectual property rights to OpenAI technologies until 2032 — and when that lapses, it will most likely have developed its own intellectual property to replace it.

Overall, Microsoft came out the big winner. The deal will likely help it maintain its AI lead over its competitors for now.

Microsoft charts its AI future

Microsoft had been planning what it would do after its divorce from OpenAI, and in 2025 it laid out that roadmap and took important steps towards that future.

In September, it launched its own large language models (LLMs), the brains behind generative AI (genAI) tools like ChatGPT and Copilot, which is powered by OpenAI’s GPT LLM. One of the homegrown models, MAI-Voice-1, will become Copilot’s voice interface. Microsoft is being cagey about what else it does, but calls it an initial “foundation model trained end-to-end [that] offers a glimpse of future offerings inside Copilot.”

The company also made a deal with OpenAI competitor Anthropic to power parts of Microsoft 365 Copilot, the version of Copilot that integrates with Microsoft 365 apps. That will improve one of Copilot’s serious shortcomings, weak Excel capabilities. It’s a first step towards taking a “best-of-breed” approach that relies on multiple LLMs, not just GPT, to power Copilot.

The biggest AI news of all, though, was the company’s announcement of its eventual AI future — the development of what it calls “Humanist Superintelligence,” a series of powerful AI-based technologies, each pointed at solving an important problem.

Mustafa Suleyman, Microsoft AI CEO and executive vice president, and co-founder and former head of Applied AI at the AI company Deep Mind, laid out the vision in a blog post. He said the company has already begun work on what he calls Medical Superintelligence. Next, he says, will be work on designing plentiful, clean, inexpensive energy. 

Microsoft avoids antitrust suits… for the moment

The Biden and even the Trump administrations have come down hard on Big Tech at times, launching or continuing antitrust lawsuits against Amazon, Apple, Google, and Meta. Microsoft has so far avoided one, with the exception of an FTC lawsuit against the company’s purchase of Activision Blizzard, which the FTC lost. Even if the agency had won, however, the suit wouldn’t have affected the core of Microsoft’s business in the way prosecutions could hurt the other big tech companies.

Microsoft has been worried about a federal antitrust lawsuit because in late November 2024, the FTC launched a broad investigation into the company’s AI, cloud computing, security, and Teams products. At the heart of the probe was the way Microsoft might have violated antitrust laws by bundling cloud computing products and Teams with its office and security products. The investigation was also looking into whether the company was gaining too much market dominance in AI.

Now, more than a year later, there hasn’t been a peep about it. That likely means the investigation has foundered. The company appears to be in the clear for now. Trump frequently uses the power of the federal government to attack and prosecute his enemies. If he turns against Microsoft, don’t be surprised if the investigation suddenly takes on steam in 2026.