Microsoft on track to pay Anthropic more than $2 billion a year for Copilot, The Information reports

Microsoft is on track to pay Anthropic more than $2 billion a year to power parts of Copilot, according to a single source cited in an October 12 report by The Information. Neither Microsoft nor Anthropic has confirmed the number.

The backdrop is a product problem. The Information reported that customers complained Copilot was buggy and not good enough at automating work in Excel and PowerPoint.

How Claude got into Copilot

Charles Lamanna, Microsoft's executive vice president of Copilot, pushed CEO Satya Nadella to bring in Anthropic's models. The Information reported that Lamanna had to argue past internal worries about Anthropic's higher prices. One account of the episode has Lamanna describing the move away from OpenAI-only technology as heresy at the time.

His case rested on demonstrations. Anthropic's latest models did better on advanced tasks such as automating financial functions in Excel and building PowerPoint decks from a user's instructions, according to the report.

Claude is now blended with OpenAI technology across Word, Excel, Outlook and PowerPoint. That is a sharp turn for a product that was built almost entirely on OpenAI's models.

Microsoft has invested tens of billions of dollars in OpenAI since 2019 and remains its largest partner. It is now also a top customer of OpenAI's rival.

The cost fight inside Microsoft

The bill is a live issue inside the company. Earlier this year, Microsoft executives expected internal spending on Anthropic technology to reach at least $1 billion, according to a separate report that cited people familiar with the matter. One of those people said Microsoft has since cut that forecast by more than a third. The company has asked employees to limit their use of Claude and lean on Microsoft's own AI tools instead.

That internal figure excludes fees generated when customers use Anthropic models through Microsoft's services. Those fees have been rising, according to the same report. Whether the $2 billion-plus figure includes customer-facing usage has not been established.

Those cost worries are the main counterweight to Lamanna's push. The Information reported that Lamanna is still weighing Anthropic and OpenAI models "to improve capabilities and margins." Microsoft has also built a router that sends each task to the cheapest model able to handle it, according to a separate account of the arrangement. That account says the router increasingly leans on OpenAI models to protect margins. The company has not described the router's behavior publicly in the material at hand.

Lamanna's standing

The Information also reported that several senior Microsoft executives name Lamanna as a potential successor to Nadella. That is the outlet's account of what unnamed executives said. Microsoft has not commented on succession.

What is not yet known

The $2 billion-plus figure comes from one anonymous source. The earlier annualized Anthropic spending figures also differ by account. One account puts Microsoft's Anthropic spending at about $500 million a year in January, while the separate report puts the internal forecast at $1 billion before the cut.

Microsoft has not said what it is actually buying. It could be per-use API access, reserved capacity or a longer commitment. It has also not said who absorbs the price gap between Anthropic and OpenAI models.

Microsoft's two-model approach is also under pressure from the same cost logic elsewhere. Meta, another large Anthropic customer, has seen the number of employees using Claude Code fall to about 30,000 from roughly 60,000 earlier this year, according to a person familiar with the matter. Part of that drop reflects spring layoffs that cut about 10% of its 78,000-person workforce. The rest reflects Meta pushing its own tools, such as MetaCode, which has more than 30,000 internal users.

The open question is the split. If a large share of the $2 billion comes from customers who choose Claude inside Copilot, Microsoft is a reseller collecting a margin. If it is mostly Microsoft's own spending, it is a cost the company is already trying to shrink. Microsoft and Anthropic have not said which it is.