Nothing seems to be going well for OpenAI. After losing key researchers to Meta and delaying its open-source model, the Windsurf deal has also collapsed.

This time, it’s Google that has spoiled OpenAI’s plans. Instead of acquiring Windsurf outright, the search giant struck a deal to license Windsurf’s technology and hire key personnel, including CEO Varun Mohan, co-founder Douglas Chen, and select R&D staff. 

The agreement is valued at around $2.4 billion and involves a non-exclusive license, allowing Windsurf to remain independent.

Effective immediately, Jeff Wang, head of business at Windsurf, has stepped into the role of interim CEO. Graham Moreno, previously VP of global sales, has taken on the role of president.

Wang said in a post on X that Windsurf will now concentrate more directly on enterprise customers, distancing itself from broader developer-focused tools in a market that has seen increasing competition. 

“There are now many varied solutions available outside of Windsurf for software development,” Wang said. “We see an advantage to double down on our focus on the enterprise problems, which has long been our primary focus.”

Here Comes Microsoft

In May, OpenAI entered exclusive talks to acquire AI coding startup Windsurf for roughly $3 billion, an effort to strengthen its developer tools amid growing competition.

The deal, however, faced friction from Microsoft. 

Microsoft, as OpenAI’s largest backer, holds rights to any intellectual property OpenAI acquires under their agreement. But OpenAI was unwilling to grant Microsoft access to Windsurf’s IP. 

This became a key sticking point. By early July, the exclusivity window expired without an extension, and OpenAI failed to close the deal, allowing Windsurf to explore other offers.

By doing so, Microsoft maintains its competitive stance by preventing OpenAI from handing over IP that could rival GitHub Copilot.

Microsoft also went shopping around and it recently partnered with Replit to bring its agentic software development platform to enterprise customers via Azure. The collaboration allows business users across departments to build and deploy secure, production-ready applications using natural language, without writing any code.

Microsoft recently made Visual Studio Code an open-source AI editor by open-sourcing the GitHub Copilot Chat extension under the MIT license. 

All of this is while OpenAI and Microsoft are already going through a rough patch in their relationship, partly due to the AGI clause.

All in all, it seems like Microsoft has indirectly helped Google steal Windsurf away from OpenAI.

What Does It Mean for Google?

Google has recently shown strong interest in agent-based IDEs. The company launched its coding agent, Jules, which was officially announced last December. Jules can fix bugs, build new features, and run and validate changes through unit tests. 

Jules also integrates with GitHub to understand the codebase and operates asynchronously. The agent is powered by Google’s latest Gemini 2.5 Pro model.

Furthermore, Google recently released Gemini CLI, an open-source AI agent that integrates its Gemini 2.5 Pro model inside a user’s terminal. This allows users to execute commands and write code using natural, conversational prompts. 

By securing Windsurf’s technology and hiring its key talent, Google has added strength to Gemini. For OpenAI, missing out on the deal puts it on the back foot in its battle with Microsoft, Anthropic, and others in the developer tools market.

It seems like Microsoft and Google both are trying to take Cursor, one of the most popular AI coding tools, head on. To be sure, OpenAI is one of the first backers of Cursor, back when it was operating as Anysphere.

All of this is while there is a growing amount of distrust building in the developer community against the pricing strategy of Cursor.

What’s Next for Windsurf?

For Windsurf, this marks another bumpy chapter, this time without its founder Mohan, who had long held the sail steady through shifting winds. The company has pivoted multiple times in the past, and Mohan has openly stated before that Windsurf has no single moat, but should instead have multiple ones.

“In any startup, you have to keep proving yourself,” he said. “All insights depreciate. Technology evolves, and whatever edge you had can fade quickly.”

He explained that what gives companies staying power isn’t a one-time insight but a compounding tech advantage. “If a company wins, it’s not because they had a tech insight a year ago. It’s because they’ve kept innovating and building on that insight.”

Windsurf was indeed headed on a winning streak all this while. According to a report from Sacra, Windsurf reached $40M in ARR in February 2025, tripling from $12M at the end of 2024. 

The company has expanded from 10,000 users in early 2023 to over 800,000 active developers by early 2025. As Wang from the team puts it, “Windsurf’s mission has always been to enable our customers to dream bigger to create whatever they want, bigger, better, and faster than ever before.” 


All of this has put it in the spotlight in a competition against all of the AI coding tools in less than a year. OpenAI started taking interest so much that it started another tussle with Microsoft for the startup. And now, Google has roped them in.

For Windsurf, their goal of reaching millions of developers is going strong, regardless of which company backs them up.

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