GitHub is one of the most interesting companies in cloud infrastructure software because it's simultaneously the primary hub where open source software lives, while also being a high growth business unit for Microsoft and the primary way they can monetize developer productivity outside of Azure AI inference.

Originally founded in 2008, it was independent for close to ten years before Microsoft acquired them for $7.5B. In a rare stroke of genius (thank you Satya), GitHub was positioned as an independent organization within Microsoft rather than being forced to assimilate. Together with the creation of VSCode (one of the most popular code editors) in 2015, Microsoft became one of the stewards of open source software, providing best-in-class tools for writing and deploying software for free. In last week's article, we covered OpenAI and their failed Windsurf acquisition. A big reason for the deal to fall apart was because OpenAI was afraid that all IP from Windsurf (a fork of VSCode) would be merged into the main platform, essentially making the deal useless.

With the resignation of Thomas Dohmke and the merging of GitHub within Microsoft's Core AI organization, the future of one of the "industry standards" hangs in the balance.

The key takeaway

For tech sales: If you work for GitHub and were there for the culture/team/mission, it's probably a good moment to accept that this stage is over. If you saw it as an entry point into selling for Azure, then you should consider what's the shortest path to moving to a different role.

For investors: In the short term, there are companies that are attracting an audience by building on top of GitHub and winning business on improved developer experience. Long term, the disruption will come from "what's next after Git". There are different ideas in the space already (real-time coding, semantic versioning, code graphs, data versioning) but there isn't yet a company that picks several of them and offers a complete new tool to be adopted. As with any developer tool, it's not the best technically that is guaranteed to win. The next big player is likely going to be strongly associated with a "superstar developer” who is able to kickstart a movement, similar to the origin story of Git.

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So what is this Git thing anyway

As per previous articles I’ve written on topics such as CI/CD pipelines and DevOps, if you would like to understand where cloud infrastructure software is going (systems), you need to know how developers work (people and process).

One of the most fundamental parts of writing code at scale is version control. If we are going to have a large team of developers work on a shared codebase, this creates a variety of risks and challenges as new code gets added.

Git is an open-source distributed version control system written by Linus Torvalds, who also happens to be the creator of the Linux kernel and its primary steward for the last 34 years. At a basic level, every developer who is working on the same codebase and using Git will have a local copy where they'll make changes and at a later stage they will work with others on merging them back into the primary application. This allows them to work on both small features and large projects with many other developers at the same time.

Git is the industry standard. GitHub was one of the companies that offered a hosted version of Git with a variety of additional functionality, the most important of which became the social part and the ability to work on open source projects together with a large crowd of individuals you might not know personally. While there are alternatives and direct competitors (GitLab), it's the network effect and critical mass of having the largest number of developers in the world on the platform that made GitHub the big winner in its space.

In practice, this means that most developers in the world spend time on GitHub as an integral part of their workflow (process and people) in both work capacity (private code repositories) and private capacity (contributing to open source projects).

The social aspect of GitHub has become so prevalent that metrics such as "Project Stars" or the number and quality of your contributions being visible on the platform create a variety of job and business opportunities.

But how do they make money?

Source: Deep Search analysis by Gemini 2.5 Pro

GitHub was acquired at $250M revenue and by 2023 had reached $1B, which would make it a very minor footnote in Microsoft's income statement ($212B for that year).

Interestingly enough, the business skyrocketed to $2B in 2024 following the successful launch and quick adoption of GitHub Copilot. Since then, we've seen a number of competing products capture bigger parts of the market share (Anthropic with Claude Code and Cursor), but it's difficult not to call this a massive success.

As such, the business today is still mostly companies subscribing for the Teams/Enterprise tier of Git-related code collaboration and storage, with Copilot, security products and a variety of consumption-driven services on the platform.

While revenue has been booming, morale has definitely lagged behind.

It’s clear that there is a desire to clear out most of the organization, first with bad quotas, then with PIPs and layoffs.

Now that Thomas is gone, the company is being merged properly within Microsoft CoreAI. Reminder on what that org means to the company:

As we begin the new year, it’s clear that we’re entering the next innings of this AI platform shift. 2025 will be about model-forward applications that reshape all application categories. More so than any previous platform shift, every layer of the application stack will be impacted. It’s akin to GUI, internet servers, and cloud-native databases all being introduced into the app stack simultaneously. Thirty years of change is being compressed into three years!
We will build agentic applications with memory, entitlements, and action space that will inherit powerful model capabilities. And we will adapt these capabilities for enhanced performance and safety across roles, business processes, and industry domains. Further, how we build, deploy, and maintain code for these AI applications is also fundamentally changing and becoming agentic.
This is leading to a new AI-first app stack — one with new UI/UX patterns, runtimes to build with agents, orchestrate multiple agents, and a reimagined management and observability layer. In this world, Azure must become the infrastructure for AI, while we build our AI platform and developer tools — spanning Azure AI Foundry, GitHub, and VS Code — on top of it. In other words, our AI platform and tools will come together to create agents, and these agents will come together to change every SaaS application category, and building custom applications will be driven by software (i.e. “service as software”).
The good news is that we have been working at this for more than two years and have learned a lot in terms of the systems, app platform, and tools required for the AI era. To more rapidly and boldly advance our roadmap across each of these layers, we are creating a new engineering organization: CoreAI – Platform and Tools.
This new division will bring together Dev Div, AI Platform, and some key teams from the Office of the CTO (AI Supercomputer, AI Agentic Runtimes, and Engineering Thrive), with the mission to build the end-to-end Copilot & AI stack for both our first-party and third-party customers to build and run AI apps and agents. This group will also build out GitHub Copilot, thus having a tight feedback loop between the leading AI-first product and the AI platform to motivate the stack and its roadmap.
Jay Parikh will lead this group as EVP of CoreAI – Platform and Tools, with Eric Boyd, Jason Taylor, Julia Liuson, Tim Bozarth, and their respective teams reporting to Jay.
Jay will work closely with Scott, Rajesh, Charlie, Mustafa, and Kevin to optimize our entire tech stack for both performance and efficiency. Additionally, Jay and team will lead our progress and work around developer productivity and Engineering Thrive across the company.
As our cloud infrastructure business continues to grow and scale to become Microsoft’s largest business, Scott will continue to lead Cloud + AI to ensure we’re delivering the quality, security, and innovation that our customers and partners count on for their most mission-critical applications, databases, and AI workloads.

Microsoft sees GitHub as an integral offering to developers with the goal of creating an entrenchment of several interconnected products: code in VSCode + GitHub Copilot, store your applications on GitHub and then power them with Azure infrastructure.

GitHub Copilot is a peculiar offering in today's landscape since it's clearly a subsidized market-share play rather than a like-for-like competitor. The free tier is basically legacy leftover infrastructure, while the "Pro" subscription is there for practical productivity optimization (auto completion of code), rather than a "companion SWE" or an "AI-native IDE". Microsoft claims 20 million Copilot signups as of July 2025, which is a very interesting choice of language (i.e. anybody who installed the extension). Most likely we are looking at the 5M-7M range of paid corporate seats, the vast majority on the $10/month plan.

GitHub Security suite represents another example of a fast-growing product that's not particularly high performance or interesting, but "good enough" and is selling well. Built on top of the Semmle acquisition, it is an easy upsell due to native integrations.

The "crown jewel" paid developer seats represent a curious long-term challenge for GitHub. In order for the product to make sense long term in an era of decimated entry-level software engineering job market, they need to move toward a consumption-based business. Consumption-style transitions are always tricky, as reflected in quota attainment dipping, as well as customers starting to reconsider their options due to unpredictable long-term costs.

At the end of the day, it's Microsoft. Azure reps sell like the best of them and the business outlook for the GitHub portfolio of products in the next few years is a positive one on paper. The problem is that it will never be significant revenue relevant to the scale that Microsoft operates in (particularly if the Azure team pulls off the biggest catch-up play in the world and actually surpasses AWS).

As such, GitHub's original purpose of being a goodwill toward the developers (i.e. Microsoft subsidizing a space for open source to exist) remains the highest value add that the company has. This brings us to the core thesis of this article, which is that Microsoft is rapidly losing developer goodwill and turning GitHub into a money-maker is a mistake similar to Google squeezing every single ad penny out of search.

This is not an obvious point to make, because on the corporate side they've been building out a DevRel engine at an unprecedented scale and Azure has some of the best set of tools on the market for managing and scaling cloud workloads at scale.

Developers are a funny crowd. While considered as "asocial nerds" by the rest of society, the reality is that developers are some of the most socially organized groups and "fashion trends" in the industry often become a critical engine behind the adoption of software and hardware.

In one of the best books on open source software, "Working in Public," the author identifies the following type of communities in the space.

Federations: Decentralized projects with high user and contributor growth, formal governance, and working groups (e.g., Linux, Rust).
Clubs: Projects with high contributor but low user growth, featuring tight-knit, dedicated communities (e.g., Clojure).
Toys: Small, personal, or experimental projects with minimal users and contributors, often maintained by a single person.
Stadiums: Projects with high user but low contributor growth, maintained by a few individuals with many casual contributors (e.g., Babel, webpack).

This mental model by definition frames open source as a "social activity," rather than driven by code alone. The dynamic of monetizing software has also changed, with prominent developers becoming micro-celebrities in the niche:

Historically, producers charge customers to access content. But today, producers can make content free to read, while instead charging for "write access": meaning, the ability to appropriate attention from producers.

Influential developers matter. Others want to mimic them and use the technology they prefer. In the last 2 years, Microsoft made a number of choices around the rollout of Windows 11 that have had significant backlash from developers. It's a platform that now everybody is forced to migrate to, but the public backlash has been quite clear:

Windows 11 has significant performance issues, leading to a significantly worse experience compared to macOS or Linux.
The system is riddled with bloat and ads.
AI features were widely integrated into the system, with little practical benefit and often leading to significant security risks that were poorly handled.

The primary reason why developers would use Windows today is because it's provisioned with their corporate laptop or they play games. With significant optimizations made on the Linux side, the gamer audience has already started to migrate to alternatives.

GitHub merging with CoreAI and losing "legacy" leadership opens the doors to a monetization drive that is very likely going to lead to developer-hostile choices. This might not happen immediately, but it would be a predictable outcome after the first 1-2 "bad quarters" under the new regime.

We are also not covering here all the technical reasons why GitHub as a platform has not adapted well to how developers write code with AI. Git was built for humans collaborating on code, not agents creating, merging and testing code, often at API-level speed.

One analogy to understand the risk here is similar to that when iPhone came into the scene. Smart developers might've decided that this is a great moment to put all of their effort into perfecting and deploying apps on Blackberry, the leading mobile smartphone platform with massive Enterprise user share. In the meantime, competitors moved to build for the App Store and compete during the rise of iOS vs Android. While this seems like an obvious blunder today, at the time that the iPhone launched, both BlackBerry and Microsoft as the makers of Windows Phone famously did not see this as a risk at all.

History doesn't always repeat itself but it often rhymes. GitHub sits at a fork in the road, that requires decisive leadership with significant vision and guts to execute. As Microsoft transitions into Azure Inc, it's very difficult to see how GitHub plays a role besides sliding into irrelevance once the relationship with developers starts to strain. I'll end the article with a quote from one of the co-founders of GitHub (none of whom remain in the company):

We cared about developers. But it wasn’t about when they added Git, it never really mattered.
They never had any taste. They never cared about the developer workflow. They could have added Git at any time and I think they all still would have lost.
You can try to explain it by the features or “value adds”, but the core takeaway that is still relevant to starting a startup today is more fundamental than if we had an activity feed or profile page or whatever. The much simpler, much more fundamentally interesting thing that I think showed in everything that we did was that we built for ourselves. We had taste. We cared about the experience.
We were developers and we built what we wanted in order to enable how we wanted to ideally work. We were the only tool in the space built by developers for developers without PMs or accountants or CEOs trying to optimize for revenue rather than for developer experience.
In the end we won because the open source community started to converge on distributed version control and we were the only ones in the hosting space that truly cared about how developers worked at all. The only ones who questioned it, approached it from first principles, tried to make it better holistically rather than just throwing more features onto something existing in order to sell it.
This is why GitHub won.

The Tech Sales Newsletter #106: The end of GitHub

The key takeaway

So what is this Git thing anyway

But how do they make money?

The Tech Sales Newsletter #105: The OpenAI play