Microsoft Shakes Off Activision Lawsuit and Musk Challenge, but AI Monetization Remains a Puzzle

Microsoft resolves two legal threats—$250M shareholder settlement and dismissal of Musk's $150B claim—but faces core challenge: only 3.3% of M365 subscribers pay for Copilot AI.

Microsoft has extricated itself from two major legal headaches in quick succession, settling a long-running shareholder suit over its Activision Blizzard acquisition and watching a $150 billion claim from Elon Musk get tossed out of court. The relief in the courtroom, however, contrasts with a stubborn challenge in the marketplace: convincing its vast user base to pay for artificial intelligence.

The $250 million settlement ends the shareholder action that was spearheaded by Sweden’s AP7 pension fund and other investors in 2022. They alleged the Activision deal — which ultimately cost Microsoft $75.4 billion, though the initial purchase price was around $69 billion — was rushed through and the $95-per-share price locked in too early to benefit former Activision executives. Under the terms of the Delaware agreement, Microsoft will cover about 40 percent of the payout, with insurers picking up the rest. The company admits no wrongdoing or liability, and eligible former Activision shareholders can expect roughly $0.30 per share.

Separately, a federal judge dismissed Elon Musk’s suit against OpenAI and Microsoft, which sought $150 billion in damages. The court accepted the defence that the claims were time-barred; Musk has vowed to appeal. For Microsoft, the ruling removes a significant — if long-shot — financial threat.

The stock barely budged on the news, closing at €357.25 on Tuesday, down 2.12 percent for the day and 11.48 percent year-to-date. The tepid investor reaction reflects that the real driver of Microsoft’s valuation is no longer gaming acquisitions or courtroom victories, but the adoption trajectory of its AI products.

Piper Sandler remains bullish, with an “Overweight” rating and a $540 price target, while RBC Capital sticks with “Outperform” and a $640 target. Both see the Copilot ecosystem as the key catalyst. Microsoft expects to add more than five million new Copilot licenses in its fiscal fourth quarter. Yet the conversion of its massive installed base remains disappointing: of the roughly 450 million Microsoft 365 subscribers, only 15 million — just 3.3 percent — pay for Copilot.

The company is responding by giving customers more flexibility. Starting this quarter, the Copilot application in Windows 11 can be fully uninstalled, and in enterprise settings it will be automatically removed after 28 days of inactivity. On the technology side, Microsoft is also working to trim AI development costs, shifting from external developer tools to internal solutions like the GitHub Copilot CLI to better control token expenses.

The cost discipline comes as Microsoft’s share of the paid AI-assistant market has slipped from around 18.8 percent in mid-2025 to roughly 11.5 percent at the start of 2026. To shore up its position, the company launched its own MAI models in the second quarter of 2026, aiming to reduce reliance on third-party models.

Beyond the U.S., regulatory friction persists. In India, Microsoft’s LinkedIn unit won temporary relief from the National Company Law Appellate Tribunal over a disclosure penalty. The case hinges on whether top executives like Satya Nadella qualify as having “control” under local beneficial ownership rules — a reminder of how complex global corporate structures invite fresh scrutiny even after old deals are settled.