Just as OpenAI was going all in on the developer ecosystem, with the acquisition of Windsurf and the launch of Codex, Microsoft has entered the chat too. The tech giant announced that it is going to make GitHub Copilot in VS Code open-source.
During his keynote speech at Microsoft Build 2025, Microsoft CEO Satya Nadella said he is excited about this development. “This is a big deal. Starting today, we will integrate these AI-powered capabilities directly into the core of VS Code, bringing them into the same open source repo that powers the world’s most loved dev tool.”
“We believe that the future of code editors should be open and powered by AI,” the VS Code team said in a statement. “As AI becomes core to the developer experience in VS Code, we intend to stay true to our founding development principles: open, collaborative, and community-driven.”
The company said that it will begin open-sourcing the GitHub Copilot Chat extension under the MIT license and plans to refactor key AI components into the core of its editor.
“What we heard from some organisations is they really don’t like closed source IDEs, so by making the other pieces open source, I think we address that need,” said Erich Gamma, creator of VS Code, in a recent podcast. He added that now enterprises have a choice between closed source and open source.
Open sourcing is expected to support third-party extension developers as well. “We want to make it easier for these extension authors to build, debug, and test their extensions,” the VS Code team said, pointing out the current limitations due to a lack of source code access.
Over the coming weeks, Microsoft will begin open-sourcing Copilot Chat and migrating components into VS Code’s core. It also plans to release its prompt testing infrastructure to assist contributors in reliably building and testing AI features.
Why Open Source Now?
The company said that over the last few months, it has observed significant shifts in AI development that motivate it to transition its AI efforts in VS Code from closed to open source.
In its blog post, the company said that large language models have improved considerably, reducing the need for proprietary “secret sauce” prompting strategies.
At the same time, the most popular and effective user experience approaches for AI interactions have become common across different editors. By making these UI elements available in a stable, open codebase, we want to empower the community to refine and build upon them.
This definitely calls out AI coding tools like Cursor, valued at $9B, and Windsurf, sold to OpenAI for $3B—both forks of Microsoft-owned VS Code.
“Is it just me or is it kinda funny that OpenAI bought Windsurf for $3B and then Microsoft just open-sourced Copilot,” quipped a user on X.
Another user posted, “Microsoft just made Copilot in VS Code open source AI editor for all! RIP cursor and Windsurf.”
On the other hand, Kartik Hariharan, a tech influencer, said that Microsoft’s open-sourcing Copilot at this stage feels like throwing in the towel. He believes they can’t figure out how to make the product work, so they are handing it over to the open-source community to solve.
“The OSS community does not have the resources to make Copilot competitive with Cursor, Windsurf, etc,” he added.
However, Gamma shared that Visual Studio Code has reached 40 million users. According to the 2024 Stack Overflow Developer Survey, 73.6% of 58,121 respondents use VS Code, making it by far the most widely adopted editor among developers. In contrast, Cursor and Windsurf each had around 1 million users as of 2025.
Speaking of VS Code forks, Gamma said that some organisations mislead users by making AI features feel overly dominant, like adding a blue button for AI everywhere, without maintaining the platform’s openness that VS Code stands for.
He said that forks like Cursor make changes such as moving the activity bar to the top, which aren’t necessarily bad, but they don’t contribute to the main VS Code project.
Copilot gets Agentic
Microsoft has also announced a new coding agent for GitHub Copilot. Embedded directly into GitHub, the agent starts working when you assign a GitHub issue to Copilot or prompt it in VS Code.
GitHub Copilot now has a coding agent embedded right where you already collaborate with developers: on GitHub. And yes, you can access it from VS Code too.
pic.twitter.com/S2oiPyMGbs
— Thomas Dohmke (@ashtom) May 19, 2025
Nadella said that the agent is capable of upgrading frameworks like Java 8 to Java 21 or .NET 6 to 9, and migrating any on-premise app to the cloud. It creates a plan for your code and dependencies, suggests fixes along the way, learns from the changes you make, and makes the entire process seamless. Microsoft’s CEO gave a live demo of it on stage, where it debugged an issue.
The tech giant has introduced a new approach, which it calls agentic DevOps. This is a reimagining of traditional DevOps, where intelligent agents collaborate with developers and with each other to automate and optimise every stage of the software lifecycle. These agents can take on tasks like bug fixes, small features, and documentation, allowing developers to stay focused on more critical work.
With Model Context Protocol (MCP), Microsoft is giving its coding agent access to data and tools beyond GitHub. Repositories can now be linked to external MCP servers through their settings, while GitHub’s official MCP server continues to offer access to all native GitHub data.
But the agent’s capabilities don’t stop at text. Powered by vision models, it can also interpret images included in issues. Developers can now drop in screenshots of bugs or visual mockups of features, and the agent will understand and act on them.
The post Microsoft Just Showed Us Why VS Code Still Rules appeared first on Analytics India Magazine.
