OpenAI reaches agreement to buy Windsurf for around $3B
127 comments
·May 6, 2025Androider
Windsurf and Cursor feel like temporary stopgaps, products of a narrow window in time before the landscape shifts again.
Microsoft has clearly taken notice. They're already starting to lock down the upstream VSCode codebase, as seen with recent changes to the C/C++ extension [0]. It's not hard to imagine that future features like TypeScript 7.0 might be limited or even withheld from forks entirely. At the same time, Microsoft will likely replicate Windsurf and Cursor's features within a year. And deliver them with far greater stability and polish.
Both Windsurf and Cursor are riddled with bugs that don't exist upstream, _especially_ in their AI assistant features beyond the VSCode core. Context management which is supposed to be the core featured added is itself incredibly poorly implemented [1].
Ultimately, the future isn't about a smarter editor, it's about a smarter teammate. Tools like GitHub Copilot or future agents will handle entire engineering tickets: generating PRs with tests, taking feedback, and iterating like a real collaborator.
[0] https://www.theregister.com/2025/04/24/microsoft_vs_code_sub...
[1] https://www.reddit.com/r/cursor/comments/1kbt790/rules_in_49...
leonidasv
The thing is: we should not need standalone editors just to use AI coding agents. They could be just plugins, but Microsoft does not want to bend the plugin API enough for that. Windsurf has a "plugin edition" for JetBrains IDEs that works really, really well[0] (they also have a VSCode plugin[1] but it's lacking in comparison).
However, given that JetBrains also have their own AI offering[2], I'm not sure how long that will last too...
[0] https://plugins.jetbrains.com/plugin/20540-windsurf-plugin-f...
[1] https://marketplace.visualstudio.com/items?itemName=Codeium....
owendarko
There are already a bunch of open source, free, and popular "AI coding agent" extensions for VS Code:
1) Cline (1.4mil downloads)
2) Roo Code (a fork of Cline, 450k downloads)
Still a drop in the bucket compared to Cursor in terms of # of users, but they're growing pretty fast.
Disclaimer: I maintain Kilo Code, which competes with 1) and 2) so I'm pretty familiar with this space/the growth patterns.
htrp
How are you differentiating from the cline/roo's of the world?
doix
> At the same time, Microsoft will likely replicate Windsurf and Cursor's features within a year. And deliver them with far greater stability and polish.
I agree with the first part, I'm much less optimistic about the second part. I suspect they will create something that is worse, but cheaper if you already pay for Github/Office 365/whatever. Then many large enterprises will switch to save money whilst the engineers complain, just like with Teams.
Aeolun
That seems pretty bold. I still find myself switching to basically anything but the VS code copilot agent any chance I get.
pjmlp
They already succeedd well enough that VSCode is the only Electron app I tolerate on my private systems, naturally on device assigned ones I have less control.
preciousoo
If the VS Code team are delivering the product, I have some amount of trust. If it’s the VS team, good luck to everyone involved
deburo
Indeed, Copilot within Visual Studio is nowhere close as good as Copilot within VSCode, and even that is still worse than Cursor in my experience.
pjmlp
VSCode is still miles behind for .NET and C++ tooling, have a bit of fate on VS team.
marricks
Wow, folks almost had me convinced MS turned a new leaf 5 years ago.
Tale as old as time, song as old as rhyme: embrace, extend, extinguish.
pjmlp
Nah, folks keep giving human behaviours to big corporations instead of understanding everyone is in the game for the shareholders.
Szpadel
For someone that never used windsurf, what features does it have that GitHub copilot does not? Reading their webpages I didn't spot any "killer feature" that would convince me to switch.
I always felt that cursor and windsurf should be just extension to vscode instead of a fork. Was there some missing functionality is vscode that was missing? Is it still missing?
There are some extensions that work in this way and allow to use multiple implementations depending on task at hand without any long term commitment.
I feel like such fragmentation is by artificial just to lock users in single ecosystem.
jstummbillig
It can write a lot of code, that works, better than vscode can (right now).
It's in a lot of ways the OpenAI story itself: Can they keep an edge? Or is there at least something that will keep people from just switching product?
Who knows. People have opinions, of course. OpenAIs opinion (which should reasonably count for something, them being the current AI-as-a-product leader) is worth $3B as of today.
ZeroTalent
It's better at coding, but they are essentially paying for users.
I would also argue that the product could be built over two weekends with a small team. They offer some groundbreaking solutions, but since we know that they work and how, it's easy to replicate them. That also means they have significant talent there.
Hence, they are also buying the employees.
The code base itself is basically worth nothing, in my opinion.
koakuma-chan
> They offer some groundbreaking solutions
What groundbreaking solutions does Windsurf offer?
throwaway7783
What groundbreaking solutions specifically?
oefrha
The differentiator of Cursor is it’s way smarter at basic code completion than GitHub Copilot. I pay for Cursor instead of GitHub Copilot even though I get the latter for free from open source contributions, and I made that decision after five minutes of usage after using Copilot for what, more than a year? I won’t even talk about how Cursor guesses where I’m going to edit next and makes the correct edit most of the time, just the fact that Copliot makes completions that result in unbalanced parentheses/braces all the time and Cursor doesn’t makes the switch a no-brainer; that’s not even a fucking AI problem, you just need to look around and see that function you just completed already has a closing curly brace, all it takes is some traditional AST analysis if your model is dumb. (Copilot made zero progress on that issue during my time using it, but I can’t say if that was fixed after I ditched it.)
bn-l
Copilot owns the platform, had an amazing head start and yet still is the worst option available. I don’t mean to be harsh but this was a titanic fumble.
beardedwizard
GitHub has been failing upward for more than 5 years. They could have totally dominated software development and security - failed. Could have been the undisputed champion of code hosting - failed. Should have dominated development co-pilots - failed.
I actually find it a little reassuring that they can't seem to get out of their own way.
stevage
They're not the champion of code hosting?
sofixa
To be fair, they have been behind the competition for many years. Gitlab had extremely good CI, security scanning, organisational concepts, etc. for years before GitHub introduced their ones (and Actions still has a worse UX, and GitHub still doesn't have anything below an organisation).
aravindputrevu
I still can't believe how they let Cursor (which is amazing until somepoint) take away all the shine.
This reminds me of "big companies moves slow.." line.
bigbinary
These are investment plays a company makes when holding too much money, and not a smart move this early in the technology imo
Buying competition while everyone’s still fighting might straddle you with a lame horse
behnamoh
> At the same time, Microsoft will likely replicate Windsurf and Cursor's features within a year. And deliver them with far greater stability and polish.
Microsoft software quality has gone downhill recently, and I'm not going to bet on them delivering something more polished than WS and Cursor here.
Side: all images on Microsoft websites are low resolution! it's like they don't even check their own website.
null
bko
Incredible timeline to a $3B exit
> Windsurf began in 2021 as Exafunction, founded by MIT graduates Varun Mohan and Douglas Chen. The company initially focused on GPU optimization before pivoting to AI-assisted coding tools, launching Codeium, which later evolved into Windsurf.
> Series B (January 2024): $65 million at a $500 million valuation.
> Series C (September 2024): $150 million, led by General Catalyst, at a $1.3 billion valuation.
> May 2025: $3 billion acquisition from OpenAI
I wonder how much of the value is really from the model or the tooling around it. They all use the same models (mostly Claude, others have been horrible and buggy in my experience). Even co-pilot agent mode now uses Claude. The editor has their own LLM (?) that does the apply since LLMs often return snippets. They work well enough on Cursor. And then you have the auto-complete, which I think is their own model as well.
But the main value from me is from the agent mode and 95% of the value is the underlying model. The other stuff could be more or less a VS Code plugin. The other benefit is the fixed pricing. I have no idea how much 500 calls cost if I were to use the API, but I expect they're probably losing money.
bfeynman
talented and smart folks for sure but can't not notice how much luck it is especially because its like 100% just better models. Windsurf raised a ton of money and then said they pivoted which they had millions raised to just do something completely different that likely wouldn't have been easier to raise for. Even in an interview with the cursor founder he kind of dumbly rambles that they launched and then basically lost a ton of traction until GPT4 came out. They have some core features like autocomplete but I'm struggling to see vision other than getting training data for iterative dev is a partial moat compared to just seeing commits and final code bases.
dist-epoch
> I wonder how much of the value is really from the model
> The other stuff could be more or less a VS Code plugin
The other stuff would take a team 6 months to implement. This is where the valuation comes from. Time to market, they are there TODAY.
crimsonnoodle58
$3B for a fork of an IDE which Microsoft keeps crippling by the day by making it's best extensions not work with forks (eg. C++, Python, C#, Remote SSH, etc)..
whywhywhywhy
It's easy to downplay as a fork because it's such a young product but ultimately if people use Cursor or Windsurf instead of VSCode then it is VSCode that needs to worry about being upstream from them and Cursor or Windsurf making their extensions no longer work with VSCode.
sidcool
That's a oversimplified view. It doesn't matter if it's a fork. It has customers and paying ones. And it has a brand. That's more than enough. $3 billion would be peanuts for OpenAI
lolinder
If it acquired those customers in an environment where Microsoft was not enforcing their marketplace terms it very much does matter if they have a plan for supporting plugins in the future.
Are Cursor and Windsurf going to ask plugin devs to push to their own plugin stores in addition to VS Code's? Will they rally jointly behind a single open store? They need to have an answer to Microsoft here, and for the good of the ecosystem I hope they do have an answer, but customers will flee quickly if they lose access to all the proprietary plugins and to the broader ecosystem.
whywhywhywhy
> Are Cursor and Windsurf going to ask plugin devs to push to their own plugin stores in addition to VS Code's?
They should and probably will soon, and if I were them I'd even consider giving plugin devs a cut of their paying customer subs if MS gets competitive about it.
> but customers will flee quickly if they lose access to all the proprietary plugins and to the broader ecosystem.
Agentic AI coding is more important to customers than VSCode's extension ecosystem. VSCode is who has to worry in this equation unless they ship the same tools in the next few months and heavily subsidize them.
Androider
VSCode must have over 100 times the user base of Windsurf and Cursor combined. All Microsoft needs to do is implement a halfway decent version of the context management features these forks added. That alone would be enough to halt user migration.
For users who've already switched to the forks, the cost of switching back is essentially zero, especially if Microsoft begins introducing changes that break fork compatibility. In that case, the migration direction would reverse almost overnight.
null
owendarko
We're reaching a point where we don't need to switch to another IDE (from VS Code/IntelliJ/insert-your-IDE-here) for "AI/vibe coding"
IDEs can support "AI coding agents" on their own.
The entire workflow for "AI coding agents" boils down to:
1. You write a prompt
2. The "agent" wraps it in a system prompt and sends it to the LLM
3. The LLM sends back a response
4. The agent performs specific actions based on that response (editing files, creating new ones, etc.)
Microsoft already started doing that with Copilot. And they have a vibrant ecosystem of VS Code extensions (I maintain one of them [1])
"AI agents" should be a feature, not a separate piece of software (IDE) that's integral to software devs.
fcanesin
OpenAI knows that everyday someone uses Gemini their ChatGPT brand dies a bit faster. Wonder what Google has in storage for I/O now in May, would be a death sentence to just steamroll with Gemini-3.
ukuina
So soon after Gemini 2.5?
ujkhsjkdhf234
I need someone to convince me this isn't one of the biggest waste of money on an acquisition. If OpenAI can't build an official IDE for less than 3 Billion then what are they even doing? Windsurf can't have that high of a userbase that you feel the need to pay for it.
ashish01
> one of the biggest waste of money on an acquisition.
I think that was when intel acquired McAfee for 8B in 2010.
singularity2001
instinctively I agree but it's all about timing: if they try to build their own IDE and hired people it would probably still take a couple of years to get a decent product. I don't know about patents.
mdaniel
> if they try to build their own IDE and hired people
Oh, haven't you heard? Hiring people to write software is so last decade. Maybe they just didn't want to vibe code a Windsurf implementation and decided to buy a press cycle for $3B
JumpCrisscross
We don’t know how OpenAI is paying. A lot of comments seem to be assuming this is an all-cash deal. We have no evidence for that.
fazeirony
you mean the company that spent $9B to make $4B in 2024? that openai?
i agree with you on this - it seems that openai hallucinates reality as much as their products do :-/
bix6
~$40M ARR makes this a 75x
Cursor yesterday was a 45X for comparison (9B, 200M)
https://techcrunch.com/2025/04/16/openai-is-reportedly-in-ta...
chipgap98
Growth rate matters a lot though. If they are growing quickly that multiple reduces quickly
ashvardanian
If I recall correctly from the recent YC interview, the Windsurf founder noted their team leans more toward GTM than engineering. That makes this less likely to be a classic acquihire (as with Rockset) and more plausibly a data play rather than a product integration.
My current read is that this is a frontier lab acquiring large-scale training data—cheaply—from a community of “vibe coders”, instead of paying professional annotators. In that light, it feels more like a “you are the product” scenario, which likely won’t sit well with Windsurf’s paying customers.
Interesting times.
simple10
Agreed. It seems like a data play and a hedge to beef up vibe code competition against upcoming Google and MS models so OpenAI doesn't lose API revenue. I would assume vibe coding consumes more tokens than most other text based API usage.
lolinder
The next step for Cursor and Windsurf both is that they need to work together to provide an answer for what it means to be a VS Code fork in the new era where Microsoft is trying to strangle the forks. If they're not already they should be teaming up with each other and with the VSCodium team and with the Open VSX marketplace.
Microsoft is an existential threat to their model here, but with the money they each have coming in they together have the opportunity to make the whole ecosystem better by building out viable infrastructure for all VS Code forks, if they can cooperate.
bradley13
M&A activity needs much more strongly regulated. Buying up potential competitors is how we get monstrosities like Microsoft and Alphabet.
chipgap98
In what world is Windsurf an OpenAI competitor?
resters
- A $3B signal that OpenAI is unable to do product
- AI assisted coding is mostly about managing the context and knowing what to put in the context to avoid confusion and dumb mistakes, it's not about the UI.
- This signals that OpenAI believes that highly effective coding assistant LLMs will become a commodity / open source and so UI / tooling lock-in is a good investment.
https://archive.md/l6n9H