The Federal Trade Commission (FTC) is intensifying its examination of Microsoft’s expansive cloud computing and artificial intelligence (AI) businesses, signaling increasing regulatory concern regarding the tech giant’s dominant position in two critical sectors of the modern economy. This investigation, which has been quietly developing for months, is now entering a more aggressive phase that could reshape how Microsoft and its competitors vie for the substantial revenues pouring into AI infrastructure and enterprise cloud services.
According to The Information, the FTC is scrutinizing Microsoft’s AI and cloud sales practices, questioning whether the company is leveraging its established position in enterprise software to funnel customers toward its Azure cloud platform and AI offerings in ways that may harm competition. The inquiry addresses the very architecture of corporate technology, particularly the bundling of productivity tools, cloud infrastructure, and generative AI capabilities that competitors argue are nearly impossible to replicate or challenge.
Central to the FTC’s inquiry is a pressing question in technology regulation: Is Microsoft using its dominance in one market—particularly, its widely used Office 365 and Windows ecosystems—to gain unfair advantages in adjacent markets like cloud computing and AI? This concern is not novel, as rivals including Amazon Web Services and Google Cloud have long criticized Microsoft’s licensing practices, claiming they make it costlier for customers to operate Microsoft software on competing cloud platforms. However, the rapid growth of generative AI has added new complexities and urgency to this debate.
Microsoft’s substantial partnership with OpenAI, in which it has invested over $13 billion and secured exclusive cloud-hosting rights, has made Azure the default destination for some of the world’s most sought-after AI models. Enterprise customers aiming to access GPT-4 and future iterations through API integrations are increasingly directed toward Azure, creating what critics describe as a potent gravitational pull that reinforces Microsoft’s cloud market share. The FTC is reportedly examining whether these arrangements, combined with Microsoft’s licensing terms for its legacy software products, constitute anticompetitive tying or bundling.
A Regulatory Shift
The timing of the FTC’s escalation is particularly notable. The global cloud infrastructure market generated over $270 billion in revenue in 2024, with Microsoft Azure holding around 25% of the market, trailing behind Amazon Web Services, which commands approximately 31%, according to estimates from Synergy Research Group. Although these figures suggest a competitive three-way race, the underlying dynamics paint a more intricate picture. Microsoft’s integrated approach—linking Azure, Microsoft 365, Dynamics 365, GitHub, LinkedIn, and now Copilot AI assistants—creates a compelling ecosystem that is extraordinarily sticky for enterprise customers.
The FTC under Chair Andrew Ferguson, who succeeded Lina Khan in early 2025 following a presidential administration change, has indicated a continued interest in overseeing Big Tech. However, the agency’s focus has shifted in tone and emphasis. While Khan’s FTC was broadly aggressive across various tech sectors, Ferguson’s commission has shown a particular focus on AI-related competition issues, viewing the emerging AI market as an area where early regulatory intervention could prevent the entrenched dominance that has been difficult to dismantle in prior technology cycles.
Microsoft has consistently rejected claims that its business practices are anticompetitive. The company maintains that its licensing terms are reasonable, asserting that customers have the freedom to choose competing cloud providers. Microsoft argues that its investments in AI, including its partnership with OpenAI, represent genuine innovation that benefits consumers and businesses. In previous statements, Microsoft President Brad Smith has emphasized the company’s commitment to responsible AI development and fair competition while noting significant concessions made to European regulators regarding cloud licensing issues.
In 2024, Microsoft reached an agreement with European cloud providers, represented by the trade group CISPE, to revise certain licensing practices that had prompted antitrust complaints. This settlement, which involved Microsoft paying approximately €20 million and modifying some licensing terms for European customers, was viewed by some as a template for resolving similar disputes globally. However, critics, including Amazon Web Services, which notably did not join the CISPE settlement, argue that these concessions are superficial and fail to address Microsoft’s fundamental structural advantages.
One of the most significant relationships in the technology industry is that between Microsoft and OpenAI. Microsoft’s exclusive cloud-provider arrangement with OpenAI means that every enterprise customer accessing OpenAI’s models through commercial channels does so via Azure. This partnership has significantly fueled Azure’s growth, especially as businesses across sectors rush to implement generative AI into their operations. Microsoft’s latest earnings disclosures indicate that Azure’s revenue growth reaccelerated in fiscal year 2025, with AI services contributing a meaningful share of that expansion.
The FTC’s interest in this relationship is intricate. Regulators are not only examining the commercial terms of the Microsoft-OpenAI partnership but also considering whether Microsoft’s investment affords it effective control over OpenAI’s strategic direction—a question that gained prominence following the upheaval at OpenAI in late 2023, which exposed Microsoft’s influence over the organization. While Microsoft does not hold a formal board seat at OpenAI, the extensive financial and operational ties between the two entities are under scrutiny, with the FTC probing whether these relationships amount to a de facto acquisition that warrants merger review.
The FTC’s investigation into Microsoft contributes to a broader regulatory effort to comprehend and possibly reshape the competitive dynamics of the AI industry. The commission has previously initiated inquiries into the relationships between major cloud providers and AI startups, such as Google’s investments in Anthropic and Amazon’s involvement with the same company. These arrangements, often characterized as partnerships that involve substantial cloud credits alongside equity investments, have drawn scrutiny for potentially functioning as acquisitions without triggering traditional antitrust review thresholds.
For Microsoft, the stakes are monumental. The company’s market capitalization, which has approached $3 trillion, is significantly bolstered by investor confidence in its AI strategy. Any regulatory action that restricts Microsoft’s ability to bundle AI services with its cloud and productivity offerings, or that necessitates structural changes to its relationship with OpenAI, could have far-reaching financial implications. Additionally, a precedent-setting enforcement action against Microsoft could impact the entire technology sector, influencing how cloud providers construct partnerships, licensing agreements, and AI service offerings.
Industry analysts and antitrust attorneys are closely monitoring the FTC’s forthcoming actions. The investigation could yield a variety of outcomes, ranging from a negotiated settlement involving licensing modifications to a formal complaint alleging anticompetitive conduct. The latter scenario would likely lead to years of litigation and could ultimately reach federal courts, where recent Supreme Court decisions have sent mixed signals regarding the scope of antitrust enforcement in technology markets.
Microsoft appears to be gearing up for an extended engagement with regulators. The company has strengthened its government affairs and legal teams while proactively engaging with policymakers on AI governance issues, aiming to position itself as a responsible steward of transformative technology. Whether this positioning will address the FTC’s concerns remains uncertain, but it is evident that the era of relatively light regulatory oversight for cloud computing and AI is nearing an end. As these technologies become increasingly integral to the global economy—powering everything from corporate productivity to national security applications—the question of who controls the underlying infrastructure, and under what conditions, has become one that regulators can no longer ignore.
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