The Federal Trade Commission is intensifying its examination of Microsoft’s sprawling cloud computing and artificial intelligence businesses, a move that signals growing regulatory concern over the tech giant’s dominant position in two of the most consequential sectors of the modern economy. The probe, which has been building quietly for months, now appears to be entering a more aggressive phase — one that could reshape how Microsoft and its rivals compete for the enormous revenues flowing into AI infrastructure and enterprise cloud services.
According to The Information, the FTC has ramped up its scrutiny of Microsoft’s AI and cloud sales practices, raising questions about whether the company is leveraging its entrenched position in enterprise software to steer customers toward its Azure cloud platform and AI offerings in ways that could harm competition. The investigation touches on the very architecture of modern corporate technology — the bundling of productivity tools, cloud infrastructure, and now generative AI capabilities into packages that competitors argue are nearly impossible to replicate or challenge.
A Regulatory Spotlight on Bundling and Lock-In
At the heart of the FTC’s inquiry is a familiar but increasingly urgent question in technology regulation: Is Microsoft using its dominance in one market — specifically, its near-ubiquitous Office 365 and Windows ecosystems — to gain unfair advantages in adjacent markets like cloud computing and AI? The concern is not new. Rivals including Amazon Web Services and Google Cloud have long grumbled about Microsoft’s licensing practices, which they say make it more expensive for customers to run Microsoft software on competing cloud platforms. But the explosive growth of generative AI has added new dimensions and new urgency to the debate.
Microsoft’s deep partnership with OpenAI, in which it has invested more than $13 billion and secured exclusive cloud-hosting rights, has made Azure the default home for some of the most sought-after AI models in the world. Enterprise customers seeking access to GPT-4 and its successors through API integrations are funneled toward Azure, creating what critics describe as a powerful gravitational pull that reinforces Microsoft’s cloud market share. The FTC appears to be examining whether these arrangements, combined with Microsoft’s licensing terms for its legacy software products, constitute anticompetitive tying or bundling.
The Cloud Wars Enter a New Regulatory Era
The timing of the FTC’s escalation is notable. The global cloud infrastructure market generated more than $270 billion in revenue in 2024, with Microsoft Azure commanding roughly 25% of the market, trailing only Amazon Web Services at approximately 31%, according to estimates from Synergy Research Group. Google Cloud holds about 12%. While those numbers suggest a competitive three-horse race, the dynamics beneath them tell a more complex story. Microsoft’s integrated approach — weaving together Azure, Microsoft 365, Dynamics 365, GitHub, LinkedIn, and now Copilot AI assistants — creates an ecosystem that is extraordinarily sticky for enterprise customers.
The FTC under Chair Andrew Ferguson, who took over from Lina Khan in early 2025 following the change in presidential administration, has signaled a continued interest in Big Tech oversight, though the agency’s posture has shifted in tone and emphasis. While Khan’s FTC was broadly aggressive across multiple tech sectors, Ferguson’s commission has shown particular interest in AI-related competition issues, viewing the nascent AI market as one where early regulatory intervention could prevent the kind of entrenched dominance that proved difficult to unwind in previous technology cycles.
Microsoft’s Defense: Innovation, Not Exclusion
Microsoft has consistently rejected characterizations of its business practices as anticompetitive. The company has argued that its licensing terms are reasonable, that customers are free to choose competing cloud providers, and that its investments in AI — including its OpenAI partnership — represent genuine innovation that benefits consumers and businesses alike. In previous public statements, Microsoft President Brad Smith has emphasized the company’s commitment to responsible AI development and fair competition, while noting that the company has made significant concessions to European regulators on cloud licensing issues.
In 2024, Microsoft reached an agreement with European cloud providers, represented by the trade group CISPE, to modify certain licensing practices that had been the subject of antitrust complaints. That settlement, which involved Microsoft paying approximately €20 million and adjusting some licensing terms for European customers, was seen by some as a template for resolving similar disputes globally. However, critics — including Amazon Web Services, which notably refused to join the CISPE settlement — argued that the concessions were superficial and did not address the fundamental structural advantages Microsoft enjoys.
The OpenAI Variable
Perhaps no single relationship in the technology industry carries as much competitive significance as the one 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 arrangement has been a powerful driver of Azure’s growth, particularly as companies across industries rush to integrate generative AI into their operations. According to Microsoft’s most recent earnings disclosures, Azure revenue growth reaccelerated in fiscal year 2025, with AI services contributing a meaningful and growing share of that expansion.
The FTC’s interest in this relationship is multifaceted. Regulators are examining not only the commercial terms of the Microsoft-OpenAI partnership but also whether Microsoft’s investment gives it effective control over OpenAI’s strategic direction — a question that became more pointed after the dramatic boardroom upheaval at OpenAI in late 2023, during which Microsoft’s influence over the nonprofit-turned-commercial entity was laid bare. While Microsoft does not hold a formal board seat at OpenAI, the financial and operational ties between the two companies are extensive, and the FTC appears to be probing whether these ties amount to a de facto acquisition that should have been subject to merger review.
Broader Implications for the AI Supply Chain
The FTC’s investigation into Microsoft is part of a broader regulatory effort to understand and potentially reshape the competitive dynamics of the AI industry. The commission has previously launched inquiries into the relationships between major cloud providers and AI startups, including investments by Google in Anthropic and Amazon in the same company. These so-called “partnerships” — which often involve billions of dollars in cloud credits alongside equity investments — have drawn scrutiny because they can function as acquisitions in all but name, binding AI startups to specific cloud platforms without triggering traditional antitrust review thresholds.
For Microsoft, the stakes are enormous. The company’s market capitalization, which has hovered near $3 trillion, is substantially supported by investor confidence in its AI strategy. Any regulatory action that limits Microsoft’s ability to bundle AI services with its cloud and productivity offerings, or that forces structural changes to its OpenAI relationship, could have significant financial consequences. Moreover, a precedent-setting enforcement action against Microsoft could ripple across the entire technology sector, affecting how cloud providers structure partnerships, licensing agreements, and AI service offerings.
What Comes Next for Redmond and Washington
Industry analysts and antitrust lawyers are watching the FTC’s next moves closely. The investigation could result in a range of outcomes, from a negotiated settlement involving licensing modifications to a formal complaint alleging anticompetitive conduct. The latter would likely trigger years of litigation and could ultimately reach the federal courts, where recent Supreme Court decisions have sent mixed signals about the scope of antitrust enforcement in technology markets.
Microsoft, for its part, appears to be preparing for a protracted engagement with regulators. The company has bolstered its government affairs and legal teams and has been proactively engaging with policymakers on AI governance issues, seeking to position itself as a responsible steward of transformative technology. Whether that positioning will be sufficient to satisfy the FTC’s concerns remains to be seen.
What is clear is that the era of relatively light regulatory oversight for cloud computing and AI is drawing to a close. As these technologies become ever more central to the global economy — powering everything from corporate productivity to national security applications — the question of who controls the underlying infrastructure, and on what terms, has become one that regulators can no longer afford to ignore. Microsoft, as the company most aggressively integrating AI across its product portfolio, finds itself at the epicenter of that reckoning.
The outcome of the FTC’s investigation will not only determine the competitive trajectory of the cloud and AI markets but will also establish the regulatory framework within which the next generation of technology giants will operate. For Microsoft, the challenge is existential in scope if not in immediacy: How does a company that has spent decades building an integrated technology empire adapt to a regulatory environment that increasingly views integration itself as a potential threat to competition?