Microsoft replaces OpenAI with its own AI models in PowerPoint and Bing, signals shift

Microsoft is openly competing with OpenAI, Anthropic more than ever

Microsoft is in a unique position as AI overtakes the tech industry. It's one of the world's largest cloud providers and software-as-a-service companies, while also holding valuable stakes in the two biggest AI labs, OpenAI and Anthropic. Those incentives are starting to clash as Microsoft posts blockbuster financial results. The company just reported an extremely profitable quarter with $90 billion in revenue and net income of $35.8 billion. For the fiscal year, which ended June 30, Microsoft reported $331.8 billion in revenue with a net income of $133.7 billion for the year. And CEO Satya Nadella is not about to let the trajectory of Anthropic and OpenAI -- which are expanding into applications and agentic infrastructure that could ultimately let them own customer relationships -- derail that kind of cash. Nadella has been preaching to enterprises to use multiple models and to stop relying on the frontier AI labs for the agentic harness/app layer. Doing so is dangerous, he's been saying, because it requires companies to share too many of their internal secrets with model makers of dubious trustworthiness. He knows his customers. Enterprise IT fears both data leaks and being locked into a vendor. Now he has openly told Wall Street analysts during the company's quarterly conference call Wednesday that this is an opportunity for Microsoft to sell customers its own homegrown models, alongside agents, AI security and more, while promising lower costs. In other words, he's pitching Microsoft as an alternative to many of the upscale services that OpenAI and Anthropic are developing for their own growth. When UBS analyst Karl Keirstead specifically asked Nadella to weigh in on the open vs. closed-sourced debate roiling the AI industry, and how Microsoft will benefit from it, Nadella came out swinging. "The goal is to have the firm be in control of their own destiny," the CEO said of enterprises. "We are very, very clear about the architectural sort of design of the platform, which is you got to keep your harness separate from the model ... that means any model at any given time is swappable." Microsoft, of course, sells a menu of harnesses (aka AI agents), too, under the Copilot name, including its coding agent GitHub Copilot. Coding agents are where much of the AI dollars are being spent today. And he used the high-profile incident from last week as proof of his warnings. "If you look even at the Hugging Face incident, the biggest thing that we should take away from that is you can't sort of depend on any one model," Nadella said. "You will maybe need multiple models to even remediate some challenges that get caused by one model. Like that's the way to think about it, right? Which is you can't be subject to a refusal of one model." The incident involved an unreleased model from OpenAI breaking out of its sandbox and successfully mounting a full-scale hack on Hugging Face, all in pursuit of besting a benchmark. Trying to understand what happened, Hugging Face at first tried to use a private frontier model (which it hasn't named) that refused to help it. So it turned to the Chinese open-source model Z.ai GLM 5.2 to analyze logs and defend its infrastructure. The incident has so shocked the industry that even Sam Altman is now saying that maybe AI development should slow down a bit. Nadella also made clear that Microsoft is happily selling its own homegrown models, the MAI family, on its own homegrown AI chips, Maya, and pitching them as cheaper alternatives. "Every customer wants the right model for each task based on quality, latency, cost, and compliance. We offer the broadest model catalog in the cloud with over 11,000 models, including the leads from OpenAI, Anthropic, Mistral, xAI, as well as our own MAI family," he said. He added: "We're also accelerating our own model development. We announced more than a dozen new models across image, voice, transcription, coding, security, including our first reasoning model, MAI thinking one, all with cost-efficient inference at the core for the enterprise use cases. We are co-designing these models with our silicon, and we are seeing 40% better performance per watt when running MAI models on Maya 200." As for Mythos? Nadella pointed to Microsoft's new Mythos competitor announced earlier this week, MAI Cyber One Flash. It "achieves better performance than the much larger Mythos model, but at half the cost when combined with our multi-agent security harness," he said. Sure, the Microsoft CEO says that enterprises should use the frontier models that OpenAI and Anthropic offer in their mix. But his bigger message is: don't trust them enough to rely on them.

Microsoft is replacing OpenAI image models in PowerPoint, Bing

Microsoft is replacing OpenAI's image-generating models with its own technology in popular products like PowerPoint and Bing. "It's faster, it's cheaper, it's higher quality, it drives better retention," Microsoft's model chief Mustafa Suleyman said in an interview. The world's largest software maker has been developing artificial intelligence models that can compete with those from OpenAI and Anthropic. In part, this is to drive down the costs of deploying AI across Microsoft's products. Suleyman said the company's Microsoft AI (MAI) models are about 85% cheaper to run in PowerPoint, for example. For now, the company gets free access to OpenAI models owing to its longstanding partnership. Still, Microsoft must provide the expensive computing infrastructure to run these models, meaning it can realize significant savings by using more efficient ones. Customers routinely generate and edit images in Microsoft apps, such as creating infographics in PowerPoint, Suleyman said. Asking the software to create an image is also one of the first AI prompts new users make, meaning it's important for the experience to be positive, he added. Companies such as T-Mobile US Inc. and easyJet PLC are now using Microsoft's newest voice-generating AI models in their call centers, the company announced. Bloomberg previously reported that Microsoft was beginning to replace OpenAI and Anthropic text models within widely used office apps. Microsoft said that MAI models in Excel are on-par with OpenAI's GPT-5.6 for common tasks while being more cost-efficient. MAI models are now being used in more than half of all Microsoft products and tested in all of them, Suleyman said. "It is a very strong showing, and we're going to continue to push extremely hard," he said.

Microsoft CEO's 'Substitutable' AI Message for OpenAI - Microsoft (NASDAQ:MSFT)

Microsoft CEO Satya Nadella Says 'Every Model Is Substitutable' -- What That Means For OpenAI * Microsoft stock is charging ahead with explosive momentum. What's behind MSFT gains? Throughout the call, CEO Satya Nadella emphasized that Microsoft's AI strategy is increasingly built around model choice rather than dependence on any single AI provider. Instead of betting exclusively on OpenAI, Microsoft is building a platform where customers can mix and match models based on cost, performance and use case. Microsoft Is Building a Multi-Model AI Platform While OpenAI remains one of Microsoft's closest AI partners, Nadella said Azure now offers customers broad model choice. "We offer the broadest model catalog in the cloud with over 11,000 models, including the latest from OpenAI, Anthropic, Mistral, xAI, as well as our own MAI family," he said. Microsoft said customer adoption is accelerating. Nadella said the company has seen "5x increase in the number of customers building with models from multiple providers." He cited Levi Strauss & Co. (NYSE:LEVI), which is using both OpenAI and Anthropic models through Microsoft's Foundry platform while deploying more than 1,000 domain-specific AI agents. 'Every Model Is Substitutable' The clearest signal came when Nadella explained how Microsoft is designing its AI platform. "We are building a new model system where the harness, context, memory, and action space are separate from any one model family." He said the approach improves more than just efficiency. "It also has the added benefit of business continuity and resilience because every model is substitutable." The theme carried into the analyst Q&A. CFO Amy Hood said Microsoft is intentionally separating the software layer from the underlying model so enterprises can switch providers over time. "You've got to keep your harness separate from the model... That means any given model at any given time is swappable," Hood said. Nadella reinforced the point moments later, arguing enterprises shouldn't become dependent on a single AI provider. "The biggest thing that we should take away from that is you can't depend on any one model," he said. Why It Matters For Investors For years, Microsoft's AI narrative has been closely tied to OpenAI. This earnings call suggested the company's competitive advantage increasingly lies elsewhere: becoming the infrastructure layer that can host OpenAI, Anthropic, xAI, Mistral and Microsoft's own MAI models side by side. That strategy appears to be resonating. Azure revenue grew 43% year over year during the quarter, while Microsoft said customers are increasingly adopting multi-model AI architectures. Microsoft Cloud revenue reached $214.4 billion for the fiscal year, and commercial remaining performance obligations climbed to $678 billion, underscoring continued enterprise demand for the company's AI platform. Photo Courtesy: Tada Images on Shutterstock.com This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

Microsoft replaces OpenAI image models with its own technology By Investing.com

Investing.com -- Microsoft Corp. (NASDAQ:MSFT) is swapping out OpenAI's image-generating models for its own technology across products including PowerPoint and Bing, the company's model chief Mustafa Suleyman said in an interview. The software maker has been building artificial intelligence models designed to compete with those from OpenAI and Anthropic PBC. One goal is to reduce the costs of deploying AI across Microsoft's product lineup. Suleyman told Bloomberg in an interview that the company's Microsoft AI models cost about 85% less to run in PowerPoint compared to OpenAI's technology. "It's faster, it's cheaper, it's higher quality, it drives better retention," he said. Microsoft currently receives free access to OpenAI models through its partnership with the company. The software maker must still provide the computing infrastructure needed to run these models, allowing it to achieve savings by using more efficient alternatives. Users frequently generate and edit images in Microsoft applications, such as creating infographics in PowerPoint, according to Suleyman. Image creation is also among the first AI prompts that new users make, making it important for the experience to be positive, he added. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.