Nadella paid $650M to hire his AI chief. After 2 years she quietly pushes him aside – these brutal numbers are why
Microsoft (NASDAQ:MSFT) CEO Satya Nadella announced a full reorganization of the company’s AI leadership on March 17, combining Copilot’s consumer and business teams under one executive and sidelining Mustafa Suleyman – the former DeepMind co-founder he paid $650 million to bring in just two years ago. (1)
Here’s some amazing data that shows why.
Jacob Andreou, a former Snap executive who spent eight years helping grow the social network, has been promoted to senior vice president of Copilot, reporting directly to Nadella. He will lead a unified organization that includes both consumer and enterprise products – two divisions that were previously housed by separate teams.
Suleyman, who came to Microsoft with the acquisition of Inflection AI for $ 650 million in March 2024, is being redirected to focus on “big intelligence” – building the next generation of AI models on the border (2). The reduction in his authority that removes him from the product is not recognized for his success – and he is in a role where the supply is measured in years, not quarters. Copilot sits at around 6 million active users as of early March 2026, behind both ChatGPT and Anthropic’s Claude, which had reached around 9 million according to Sensor Tower data cited by CNBC (2).
Microsoft 365 has more than 450 million paid seats. After nearly two years on the market, Copilot has converted nearly 15 million of its users into paying users. That’s a 3.3% conversion rate, at $30 per user per month, which generates about $5.4 billion in annual revenue. That is less than what Microsoft spent on infrastructure in one (3) quarter.
Microsoft itself raised that figure during its Q2 FY2026 call, noting that seat growth was up more than 160% year over year. But most M365 users have access to Copilot’s basic chat features for free. The premium paid base remains small.
Independent research tells an even worse story. A Recon Analytics survey of more than 150,000 paid AI subscribers found that Copilot’s market share fell from 18.8% in July 2025 to 11.5% in January 2026 — a 39% cut. The most devastating finding: when employees only have access to Copilot, adoption remains at 68%. Add ChatGPT as an option and Copilot drops to 18%. Add Gemini on top of that and just 8% choose Copilot. (4)
That drop — from 68% to 8% — gets to the heart of why Nadella is taking direct control and messing up the group. Microsoft can put Copilot in front of 450 million users, but 9 out of 10 of them choose competitors.
He brings in someone with a track record of customer growth for Andreou’s Snap where the issue is discovery and execution, not AI brainpower.
Nadella’s memo described the vision as moving Copilot “from a collection of nice products to a truly integrated system.” Essentially, that would mean bringing together four groups – the Copilot experience, the Copilot platform, Microsoft 365 apps and AI models – under one roof.
The company is also strengthening monetization. As of April 15, Copilot will no longer be available within Word, Excel, PowerPoint and OneNote without a paid license. (5)
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Microsoft isn’t just losing the race for adoption in its space. The vast landscape of AI is shifting beneath it.
On March 9, just eight days before the leadership change, the company launched Copilot Cowork – a new feature built not on OpenAI’s models but on Anthropic’s Claude. (6) Microsoft is now relying on a competitor’s technology to power its flagship AI product, while at the same time trying to build competing frontier models in-house under Suleyman.
And the Microsoft-OpenAI relationship is showing cracks. The Financial Times reported on March 18 that Microsoft is weighing legal action over a $50 billion deal that would make AWS the exclusive cloud provider for the OpenAI business platform — potentially breaking Microsoft’s exclusive Azure deal. (7)
Microsoft stock is down nearly 17% year to date as of late March 2026, trading at a low of $380 — down from around $460 at the start of the year. (8) Q2 FY2026 revenue came in at $81.3 billion, up 17% year-over-year. It’s still going strong – but the Copilot story that so many investors have been banking on is still being worked out.
A reorg doesn’t change the stats overnight. Whether Andreou can solve the last problem that Suleyman couldn’t solve – turning Copilot from something integrated into something selective – will determine whether Microsoft’s infrastructure bet starts to pay off. If not, that $650 million acquisition is starting to look less like a strategic hire and more like the most expensive sabbatical in corporate history.
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Microsoft Official Blog (1); CNBC (2); Microsoft Q2 FY2026 Earnings Release — SEC Filing (3); Recon Analytics (4); Windows Central (5); GeekWire (6); Financial Times (7); Financial Charts (8)
This article provides information only and should not be construed as advice. Offered without warranty of any kind.
