July 06, 2026

Copilot Now Has to Earn Its Keep, Microsoft Tells Staff, as Fresh Round of Layoffs Expected

Microsoft has told the 11,000 people working on Copilot that the product needs to “earn the right to exist.” The line comes from an internal memo written by Jacob Andreou, the Executive Vice President who took charge of Copilot in March, and reported by The Information earlier this month.

The plan is to merge the separate consumer and enterprise versions of Copilot into a single app, expected in August. The alleged subsequent stage is to cut what isn’t working, with Copilot Podcasts and Copilot Labs both reportedly being scrapped. Next is, is add a new paid tier of “AutoPilot” agents that act on their own, without being asked. These will seemingly draw on Teams, Outlook, OneDrive and SharePoint via Microsoft Graph. Andreou, a 33-year-old former Snap executive, reportedly wrote that Copilot should focus on “real work” rather than intelligence for its own sake.

The memo landed two days after Microsoft launched a separate venture in Microsoft Frontier Company. This is a $2.5 billion unit putting 6,000 engineers and consultants inside client organisations to help them get AI systems actually working, a model known as forward-deployed engineering. Commercial Business CEO Judson Althoff pitched it as building:

“The largest, most capable, outcome-driven engineering organisation in the industry.”

Both moves sit alongside reported job cuts across sales, consulting, and Xbox. These will amount to roughly 2.5% of Microsoft’s roughly 228,000 staff, according to Business Insider. Although Microsoft has declined to confirm the figure at the moment of publication, it’s expected to be up to 5,700 people. Notably, none of this has been presented by Microsoft as one strategy. It’s been pieced together from three separate reports inside a single week.

Why the Microsoft Copilot and Frontier Company News is Happening Now

Put together, the three moves arguably point at the same gap. Microsoft has more Copilot users than any AI company on the planet and can’t get most of them to pay. Fewer than 4.5% of Microsoft 365’s 450 million business seats currently pay for Copilot features, according to Satya Nadella himself in Microsoft’s most recent earnings call, albeit he framed it as a growth area for the business. Copilot evidently has a marketing or perception problem, regardless of whether it comfortably has the greatest exposure of any enterprise AI software.

Microsoft isn’t alone in the forward-deployed engineering bet, either. Amazon committed $1 billion to a comparable unit two days earlier. Meanwhile, Anthropic and OpenAI both launched similar ventures in May. It’s become the industry’s shared answer to the same problem. Selling AI is easy, getting it to actually work inside a real company is not.

What it Means for CX and IT Teams and Their AI Adoption

For anyone running Copilot Studio agents or Dynamics 365 Customer Service, patience is probably the sensible response here. Anything built on Copilot right now sits on a product Microsoft itself says isn’t finished. The August relaunch brings new pricing, a new paid agent tier, and the loss of some current features, so it’s worth holding off on further Copilot-based CX spend until the details are public.

Anyone renewing or expanding a Copilot contract soon has a reasonable issue to flag. What happens to features cut mid-contract, and what will AutoPilot cost on top of existing seats?