Nadella Admits Copilot "Doesn't Really Work": Microsoft in Crisis Mode

The CEO Who Criticizes His Own Product

I won't sugarcoat it: when the CEO of a $3 trillion company sends an internal email saying his flagship product "doesn't really work," something is very wrong.

That's exactly what Satya Nadella did in late December 2025. According to The Information, Microsoft's CEO sent a message to senior engineers working on Copilot where he described the Outlook and Gmail integrations as "basically not functional" and "not smart."

My verdict is clear: Microsoft has a serious problem. And the most concerning part isn't that Copilot has technical flaws. It's that the company has been trying to fix them for over a year and can't.

The Numbers Microsoft Would Rather Hide

Stagnant Market Share

The data is brutal. While Google Gemini quadrupled its market share in a year, Copilot lost ground. From 1.5% to 1.1%. With all of Windows, Edge, Office, and Bing distribution behind it.

If you ask me directly: Microsoft has the largest distribution system in the world for an AI product and still can't break past 1%.

Enterprise Adoption: Half Don't Know If It's Worth It

70% of Fortune 500 companies have adopted Microsoft 365 Copilot. Sounds good, but there's a huge asterisk: "adoption" means pilots and phased rollouts, not widespread use.

The reality:

• 50% of companies haven't deployed Copilot to all employees
• 50% of technology leaders surveyed don't know if it's worth the $30/month
• Equal numbers of executives say it's worth it as those who say it's not

After more than a year on the market, having half your customers not know if your product is worth the cost is an alarm signal.

Why Nadella Is Furious

The Email That Changed Everything

According to internal sources cited by The Information, Nadella sent an email to about 100 senior engineers where he was brutally direct:

"Copilot's Gmail and Outlook integrations don't really work for most cases. They're not smart."

This is no minor criticism. Outlook is the heart of Microsoft 365. If Copilot doesn't work well there, it doesn't work.

But what concerns Nadella most is the comparison with Google:

"Especially compared to Google Gemini's recent advances."

When Microsoft's CEO cites Google as the reference for what his product should do, things are serious.

The Ghost of the Past

Nadella isn't stupid. He knows what happens when Microsoft loses a technology battle. Internally, he has reminded his teams of historical mistakes:

• Search: Google dominated while Microsoft stumbled with Bing
• Mobile: Windows Phone failed while iOS and Android conquered the world
• Tablets: Surface arrived late to a party Apple had started

According to The Information, Nadella has warned company leaders that resisting AI integration could mean their departure. The message is clear: this is existential.

Nadella Takes Direct Control

Facing the crisis, the CEO has done something unusual: personally assuming oversight of Copilot development.

Organizational Changes

According to reports, Nadella actively participates in a Teams channel with 100 senior engineers. He jumps in when he feels AI features aren't performing. He leads weekly meetings where he pushes hard on execution.

More revealing: he's personally calling potential hires and approving salaries well above market to steal talent from OpenAI and Google DeepMind.

After years covering Microsoft, I don't remember Nadella being so involved in a specific product. That says a lot about the gravity of the situation.

The $30 Per User Problem

The Math That Doesn't Add Up

Copilot for Microsoft 365 costs $30 per user per month. But that's just the add-on. You need a base Microsoft 365 license ranging from $12.50 to $57 per user.

Real cost per employee:

For a company of 1,000 employees with E3, we're talking about $792,000 per year in licensing alone. It's a massive investment.

Uncertain ROI

Microsoft and Forrester studies talk about savings of 8-20 hours per user per month. But the reality in the field is different:

What Microsoft promises:

• 8 hours/month saved for general users
• 20 hours/month for advanced users
• ROI of $3.70-$10.30 for every $1 invested

What companies report:

• Pilots that extend indefinitely without going to production
• Finance teams demanding ROI proof before approving expansions
• Many licenses purchased but unused ("shelfware")

The classic problem: you buy 1,000 licenses but only 300 employees actively use the tool. You're burning 70% of the investment.

And Now They're Raising Prices

As if the situation weren't complicated enough, Microsoft announced in December 2025 that it will raise Microsoft 365 prices starting July 1, 2026:

Microsoft's justification: they're including "Copilot Chat" and security features in base plans. But the additional $30/month for full Copilot remains.

My direct opinion: raising prices while your CEO admits the product doesn't work well is a risky move.

Gemini: The Competitor Microsoft Underestimated

The Meteoric Rise

While Copilot stagnated, Google Gemini had a spectacular 2025:

What Google does better:

1. Integrated search: Gemini uses Google Search, not Bing. That matters.
2. Massive context: 1 million tokens vs Copilot's more restrictive limits
3. Verification: Direct citations that link to spreadsheet cells or PDF paragraphs
4. Multimodality: Text, images, voice natively integrated

The Comparison That Hurts Microsoft

When Nadella mentions that Copilot needs to improve "compared to Gemini's advances," he's referring to this. Google is executing better.

The Technical Issues Nadella Criticized

Integrations That Fail

The specific issues mentioned in reports include:

Outlook + Gmail:

• Inconsistent sync between accounts
• Email summaries that miss key information
• Reply suggestions that don't capture context

Consumer features:

• Generative editing in Microsoft Photos that doesn't work
• Clipchamp subtitles that fail
• Forced integrations that slow down applications

General experience:

• AI features added to everything regardless of utility
• Copilot popups interrupting workflows
• Degraded performance in apps that didn't need AI

A Windows Central user summarized it perfectly:

"Every app, service, and product Microsoft has now has some kind of AI integration, regardless of quality and usefulness."

The Market Reaction: "Microslop"

On December 29, 2025, Nadella published a blog post asking the industry to move past "arguments of slop vs sophistication." The response was viral... but not as he expected.

"Microslop" became a trending topic. Users criticized Microsoft for adding AI to everything without improving quality. The term "slop" (low-quality AI-generated content) became associated with the brand.

For a company investing billions in AI, having its name linked to "slop" is a PR disaster.

Security and Governance Concerns

CISOs Are Worried

Copilot has access to the entire Microsoft 365 tenant: SharePoint, Teams, OneDrive, Exchange. That generates legitimate fears:

• Oversharing: Can Copilot expose documents it shouldn't?
• Compliance: How do you control what information the AI uses?
• Audit trail: Who's responsible if Copilot leaks sensitive data?

According to Gartner, nearly half of IT leaders say they lack confidence in their ability to manage Copilot's security and access risks.

Regulators Are Watching

The EU and UK are examining Copilot closely. The Dutch government commissioned a data protection review that identified transparency, retention, and accuracy gaps.

In the United States, courts are beginning to treat Copilot prompts, responses, and even training data as discoverable content in litigation.

For companies in regulated sectors (finance, healthcare, legal), these risks can be dealbreakers.

Alternatives Gaining Ground

Google Gemini for Workspace

If you already use Google Workspace, Gemini is the obvious choice:

• Native integration with Docs, Sheets, Gmail, Calendar
• Google Search as backend (not Bing)
• Competitive pricing: $20/month for advanced users

ChatGPT Enterprise

For companies that don't want to depend on Microsoft or Google:

• The most advanced model available (GPT-4)
• Ecosystem independence
• Negotiable corporate pricing

Specialized Options

What's Coming in 2026

Microsoft's Roadmap

Despite the problems, Microsoft pushes forward:

Microsoft is betting it can fix the problems before market patience runs out.

My Prediction

After years of following Microsoft, my verdict is clear:

Short term (2026): Nadella will achieve incremental improvements. Integrations will work better. But it won't be enough to close the gap with Gemini.

Medium term (2027-2028): The battle will be decided in enterprise. If Microsoft doesn't demonstrate clear ROI, Copilot renewals will drop. Companies have little patience for $30/user products that don't deliver.

The existential risk: Microsoft has something Google doesn't: distribution. Windows, Office, Azure. But if Copilot keeps disappointing, that distribution becomes an annoyance, not an advantage. Users are already exploring Linux and alternatives. That's not a joke.

What To Do If You're a Microsoft Customer

If You Already Have Copilot

1. Audit real usage: How many licenses are active? How many unused?
2. Measure before renewing: Establish productivity metrics before the next billing cycle
3. Train users: Many adoption problems are training issues, not product issues
4. Negotiate: With the pressure Microsoft is under, there's room for discounts

If You're Evaluating Copilot

1. Start small: Limited pilot, not massive deployment
2. Actively compare: Test Gemini and ChatGPT in parallel
3. Define exit criteria: What metrics decide if you continue or abandon?
4. Wait until July: Prices change, so do offers

If You Ask Me Directly

I wouldn't invest $30/user/month in a product whose CEO admits "doesn't really work." I'd wait for Microsoft to demonstrate concrete improvements. There are alternatives that work today, not promises for tomorrow.

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Do you use Microsoft Copilot in your company? Has it been worth the $30/month? The battle between Microsoft and Google for enterprise AI has just begun, and for now, Redmond is losing.