The Halo Year: A Narrative of Unstoppable Triumph
In the spring of 2025, Satya Nadella strode onto the Build stage in Seattle, the room electric with anticipation. “We are the company shipping AI at scale,” he declared, and the applause rolled like thunder. It was the culmination of a year that seemed, on the surface, flawless. Forbes named Microsoft the World’s Most Admired Company for the tenth time. Barron’s splashed “The AI Juggernaut” across its cover. The stock hovered near $480, analysts on CNBC calling it “unassailable.” Nadella was everywhere—podcasts, panels, the cover of Fortune—positioned as the steady, thoughtful steward guiding humanity into an AI-powered future.
Fiscal 2025 delivered the numbers to match. Revenue reached $281 billion, up 15%. Azure grew 33%, the Intelligent Cloud segment alone generating billions in operating income. Over 70% of Fortune 500 companies were said to be using Copilot. The Work Trend Index painted pictures of productivity soaring, employees reclaiming hours lost to drudgery. Microsoft had threaded the needle: aggressive AI investment without the stumbles of rivals. Apple grappled with Vision Pro skepticism; Google faced antitrust fires. Microsoft? It was the adult in the shielding room.
But in the fine print of earnings calls, a different story whispered. CFO Amy Hood, precise as always, noted in October that capex would “increase sequentially,” with FY26 growth potentially higher than FY25’s $62 billion. Demand was accelerating, she said, and Microsoft was building to meet it. Analysts nodded—AI required datacenters, GPUs, power. No one dwelled on the deceleration: Azure growth down from 51% two years prior. Or on the margins dipping under AI weight. The halo held.
The year had been a PR masterclass. Nadella’s memos to employees spoke of “disciplined cost phase” even as profits soared. The OpenAI partnership was hailed as visionary. Copilot demos dazzled. And the stock climbed, buoyed by a market hungry for AI winners. Yet beneath the glow, the bills were mounting. The AI dream required billions in datacenters, power contracts, chips. And the returns? Still emerging.
The Squeeze Montage: Four Moves in Nine Months
Patterns emerge slowly, then all at once. Between July and December 2025, Microsoft executed four pricing maneuvers across its most loyal constituencies. Each was framed as “alignment” or “value.” Each landed quietly. Together, they formed a montage of extraction.
- Developers: GitHub self-hosted runners pricing backlash November 16: GitHub announces a $0.002 per-minute charge for self-hosted Actions runners—compute on users’ own hardware. The rationale: subsidizing infrastructure for all. The reaction: immediate fury. #GitHubGreed trended with 140k posts. Petitions surged past 50k signatures. December 17: postponed indefinitely. A reversal, yes—but the message lingered. Developers, already funding their own clouds, saw it as a tax on independence. The attempt exposed the blueprint: when capex bills hit, squeeze the locked-in base.
- Coders: IntelliCode discontinued 2025 December 12: VS Code 1.107 ships with a buried note—IntelliCode individual tier deprecated. For years, 60 million developers enjoyed free, local AI completions. Now: GitHub Copilot only, $10/month with limits. The email was clinical: “Aligning product investment with customer value.” Hacker News threads exploded—28k upvotes on “60M devs screwed.” Solo developers and open-source contributors began migrating to alternatives like Tabnine or Codeium. A free tool, euthanized to feed a subscription.
- Office workers: Microsoft 365 price hike 2026 December 4: Third hike in four years, effective July 2026—up to 16.7% on E5. Justification: over 1,100 new features, including Copilot integrations. But Microsoft’s own Work Trend Index buried the truth: Copilot active on just 1.8% of eligible seats. IT departments whispered about pilots stalling, trials of Google Workspace accelerating. And quietly, Skype consumer shut down in May—once a potential Slack killer, now a cost cut.
- Gamers: Game Pass Ultimate $30, Halo on PlayStation October 1: Ultimate jumps to $29.99/month. Phil Spencer tied it to Call of Duty. Then the kicker: Halo remake announced for PlayStation 2026, day-one. The crown jewel, no longer exclusive. Reddit raged—42k upvotes on “rent-seek scam.” Churn estimates spiked 8%. $30 for access, but the value proposition fracturing.
Four constituencies. Four squeezes. All in 2025. All justified by “AI value” or “infrastructure costs.” The pattern was unmistakable: when growth slows, squeeze the installed base.
The Money Beneath the Moves
The numbers told the fuller story. FY25 closed strong—$281 billion revenue, Azure 33%. But deceleration was real: from 51% two years earlier. Capex? $62 billion, guiding higher for FY26 amid “accelerating demand.” Hood warned margins would dip—AI investments biting. Free cash flow flat despite revenue gains.
Copilot adoption rate 2025: Microsoft boasted 70% Fortune 500 usage. Analysts saw different—attach rates below 2%, far from the $30/seat dream. Pilots abounded; paid seats lagged.
Layoffs: over 15,000 in 2025—waves in May (6,000), June sprinkles, July (9,000+). Came after record quarters, followed by beats. Nadella: “Weighing heavily on me.” Yet margins expanded. Bloat correction, not transformation.
The Precedents: When the Pattern Played Out Before
History doesn’t repeat, but it rhymes.
IBM, late 1980s–early 1990s: Mainframe king. Hiked maintenance fees aggressively as client-server loomed. Killed cheaper tiers. 1993: 60,000 layoffs in one year. Revenue flatlined for a decade. Stock lost hundreds of billions in today’s dollars.
BlackBerry, 2010–2013: Enterprise darling. Raised BIS/BES fees as iPhone rose. Axed affordable models. Thousands cut. Growth from 50% to single digits. Stock down 95%.
Intel, 2018–2024: CPU monopoly. Squeezed OEMs with hikes, shifted tools to subscriptions. 15,000 layoffs in 2024 amid AI pivot. Capex ballooned. Revenue stalled, stock halved.
Cisco, 2001 and 2011–2016: Network ruler. Raised support prices twice. 14,000 cuts. Growth evaporated.
Each was admired. Each squeezed. Each faced a cliff.
The Frog
In 1869, Friedrich Goltz removed frogs’ brains, raised heat gradually—they stayed until cooked. The myth endures: slow changes go unnoticed.
Microsoft’s investors sit in warming water. Stock near highs. Analysts “Buy.” But four constituencies just paid more for less. Capex outruns revenue. Copilot lags. Layoffs prove bloat. Precedents warn.
2026: the year the temperature hits critical. Azure dips below 25%. Copilot misses targets. Churn accelerates.
The frog notices steam. The question: does it jump?