Microsoft drops Claude Code after budget burned

Microsoft to drop Claude Code by June 30th after burning through yearly AI budget in months

Published: 25 May 2026

Last updated: 29 May 2026

Linas Kmieliauskas
Contributor

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After inviting thousands of developers to use Anthropic's AI coding tool Claude Code in December, software giant Microsoft is now reportedly looking to remove their licenses.

After inviting thousands of developers to use Anthropic's Claude Code in December, Microsoft exhausted its annual AI budget due to token-based billing and is now terminating licenses by June 30th.
Microsoft is steering its developers away from Claude Code toward Copilot CLI, an AI-powered coding assistant developed by Microsoft-owned GitHub.
The AI industry's shift from flat-rate fees to token-based billing, which charges for every line of code generated, has become too expensive, with companies like Uber also burning through their 2026 budgets in just four months.

Key Takeaways by nexos.ai, reviewed by Cybernews staff.

Claude Code has become very popular among the tech giant's developers, who are now being steered towards Copilot CLI, an AI-powered coding assistant developed by Microsoft-owned GitHub, The Verge reported, citing undisclosed sources.

GitHub, the world’s largest code hosting platform, allows developers to build, debug, and understand code through natural language conversations. As reported by Cybernews last week, it was hacked, and the criminals are now selling the stolen data online.

As Anthropic's token-based billing consumed Microsoft's annual AI budget in months, Claude Code licenses could be terminated by June 30th.

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Jonathann Low, Partner and Co-founder of Predictiv Consulting, explained that the AI industry's move from flat-rate fees to token-based billing, which charges for every line of code generated, has become too expensive for many companies.

For example, Uber said that it has burned through its entire 2026 budget in four months.

"It is prudent to assume that a modus vivendi will eventually be reached that allows AI companies to recoup some of their investments without killing usage. But when that will be and how it will be engineered is not yet apparent," Low concluded, adding that the push and pull between provider and customer could suppress some demand.

Earlier in May, Anthropic said that its partnership with SpaceX "will substantially" increase its compute capacity and that this has already allowed the company to increase its usage limits for Claude Code and the Claude API.

There were no official comments from either Microsoft or Anthropic regarding the partnership.

A year ago, Microsoft CEO Satya Nadella claimed that AI was already responsible for up to 30% of the company's code.

FAQ

Does Claude Code have a free tier?

Claude Code does not have a free tier. It requires a paid subscription to use, typically through Anthropic's Claude Pro or API access plans.

Does Claude Code run locally?

Claude Code (the CLI tool) can be configured to run with local open-source models on your machine, though by default it uses Anthropic's cloud API. So yes, local execution is possible when you set it up with compatible local models.

Is Claude Code open source?

No, Claude Code is not open source. It uses a proprietary license despite being hosted on GitHub. However, there was an accidental source code leak in April 2026 when Anthropic shipped a sourcemap in their npm package, which some developers have used to create unofficial open-source rebuilds.