OpenAI’s Windsurf deal is off, and Windsurf’s CEO is going to Google (opens in new tab)

Agreed on everything. Just to add, not only anthropic is offering CC at like a 500% loss, they restricted sonnet/opus 4 access to windsurf, and jacked up their enterprise deal to Cursor. The increase in price was so big that it forced cursor to make that disastrous downgrade to their plans.

I think only way Cursor and other UX wrappers still win is if on device models or at least open source models catch up in the next 2 years. Then i can see a big push for UX if models are truly a commodity. But as long as claude is much better then yes they hold all the cards. (And don't have a bigger company to have a civil war with like openai)

- Forking VSCode is very easy; you can do it in 1 hour.

- Anthropic doesn't use the inputs for training.

- Cursor doesn't have $900M ARR. That was the raise. Their ARR is ~$500m [1].

- Claude Code already support the niceties, including "add selection to chat", accessing IDE's realtime warnings and errors (built-in tool 'ideDiagnostics'), and using IDE's native diff viewer for reviewing the edits.

[1] https://techcrunch.com/2025/06/05/cursors-anysphere-nabs-9-9...

Is this $900M ARR a reliable number?

Their base is $20/mth. That would equal 3.75M people paying a sub to Cursor.

If literally everyone is on their $200/mth plan, then that would be 375K paid users.

There’s 50M VS Code + VS users (May 2025). [1] 7% of all VS Code users having switched to Cursor does not match my personal circle of developers. 0.7% . . . Maybe? But, that would be if everyone using Cursor were paying $200/month.

Seems impossibly high, especially given the number of other AI subscription options as well.

[1] https://devblogs.microsoft.com/blog/celebrating-50-million-d...

I also just prefer CC's UX. I've tried to make myself use Copilot and Roo and I just couldn't. The extra mental overhead and UI context-switching took me out of the flow. And tab completion has never felt valuable to me.

But the chat UX is so simple it doesn't take up any extra brain-cycles. It's easier to alt-tab to and from; it feels like slacking a coworker. I can have one or more terminal windows open with agents I'm managing, and still monitor/intervene in my editor as they work. Fits much nicer with my brain, and accelerates my flow instead of disrupting it

There's something starkly different for me about not having to think about exactly what context to feed to the tool, which text to highlight or tabs to open, which predefined agent to select, which IDE button to press

Just formulate my concepts and intent and then express those in words. If I need to be more precise in my words then I will be, but I stay in a concepts + words headspace. That's very important for conserving my own mental context window

Claude Code is just proving that coding agents can be successful. The interface isn’t magic, it just fits the model and integrates with a system in all the right ways. The Anthropic team for that product is very small comparatively (their most prolific contributor is Claude), and I think it’s more of a technology proof than a core competency - it’s a great API $ business lever, but there’s no reason for them to try and win the “agentic coding UI” market. Unless Generative AI flops everywhere else, these markets will continue to emerge and need focus. The Windsurf kerfuffle is further proof that OpenAI doesn’t see the market as must-win for a frontier model shop.

And so I’d say this isn’t a harbinger of the death of Cursor, instead proof that there’s a future in the market they were just recently winning.

Cursor see it coming - it's why they're moving to the web and mobile[0]

The bigger issue is the advantage Anthropic, Google and OpenAI have in developing and deploying their own models. It wasn't that long ago that Cursor was reading 50 lines of code at a time to save on token costs. Anthropic just came out and yolo'd the context window because they could afford to, and it blew everything else away.

Cursor could release a cli tomorrow but it wouldn't help them compete when Anthropic and Google can always be multiples cheaper

[0] https://cursor.com/blog/agent-web

Strictly speaking about large, complex, sprawling codebases, I don't think you can beat the experience that an IDE + coding agent brings with a terminal-based coding agent.

Auto-regressive nature of these things mean that errors accumulate, and IDEs are well placed to give that observability to the human, than a coding agent. I can course correct more easily in an IDE with clear diffs, coding navigation, than following a terminal timeline.

Some excellent points. On “add selection to chat”, I just want to add that the Claude Code VS code extension automatically passes the current selection to the model. :)

I am genuinely curious if any Cursor or Windsurf users who have also tried Claude Code could speak to why they prefer the IDE-fork tools? I’ve only ever used Claude Code myself - what am I missing?

I never understood why those tools need to fork Visual Studio Code. Wouldn't an extension suffice?

One competitor to Claude Code that I don't hear much about is Jetbrains Junie. From my experience, the code it generates is as good as CC, and if you've purchased a Jetbrains license you probably have some amount of free Junie every month.

I'll fill in some context. I think the value of Cursor as an IDE is probably somewhat ephemeral. It's mostly combating Microsoft's ambitions to keep other players busy and box them out of the market. Agents gain a lot of value from model context protocol and there's an amazingly short list of clients that fully support the protocol, but the VSCode Chat window is one of them: https://modelcontextprotocol.io/clients

I actually do prefer the view that having the agent built into an IDE brings me but I'll be damned if I'm forced to use CoPilot/OpenAI. Second to that, the agent does have access to a lot more contextual tools by being built into the editor like focused linting errors and test failures. Of course that demands your development environment is setup correctly and could be replicatable with Claude Code to some extent.

I never got the valuation. I (and many others) have built open source agent plugins that are pretty much just as good, in our free time (check out magenta nvim btw, I think it turned out neat!)

The Microsoft investments in both VSCode and GitHub are looking incredibly prescient.

> with a simple extension for some UX improvements

What are the UX improvements?

I was using the Pycharm plugin and didn’t notice any actual integration.

I had problems with pycharm’s terminal—not least of which was default 5k line scroll back which while easy to change was worst part of CC for me at first.

I finally jumped to using iterm and then using pycharm separately to do code review, visual git workflows, some run config etc.

But the actual value of Pycharm—-and I’ve been a real booster of that IDE has shrank due to CC and moving out of the built in terminal is a threat to usage of the product for me.

If the plugin offered some big value I might stick with it but I’m not sure what they could even do.

>> Claude Code has absolutely exploded

Does anyone have a comparison between this and OpenAI Codex? I find OpenAI's thing really good actually (vastly better workflow that Windsurf). Maybe I am missing out however.

> What does Cursor/Windsurf offer over VS Code + CC?

Cursor's @Docs is still unparalleled and no MCP server for documentation fetching even comes close. That is the only reason why I still use Cursor, sometimes I have esoteric packages that must be used in my code and other IDEs will simply hallucinate due to not having such a robust docs feature, if any, which is useless to me, and I believe Claude Code also falls into that bucket.

just curious because I'm inexperienced with all the latest tools here

> - Tab completion model (Cursor's remaining moat)

What is that? I have Gemini Code Assist installed in VSCode and I'm getting tab completion. (yes, LLM based tab completion)

Which, as an aside I find useful when it works but also often extremely confusing to read. Like say in C++ I type

    int myVar = 123

The editor might show

    int myVar = 123;

And it's nearly impossible to tell that I didn't enter that `;` so I move on to the next line instead of pressing tab only to find the `;` wasn't really there. That's also probably an easy example. Literally it feels like 1 of 6 lines I type I can't tell what is actually in the file and what is being suggested. Any tips? Maybe I just need to set some special background color for text being suggested.

and PS: that tiny example is not an example of a great tab completion. A better one is when I start editing 1 of 10 similar lines, I edit the first one, it sees the pattern and auto does the other 9. Can also do the "type a comment and it fills in the code" thing. Just trying to be clear I'm getting LLM tab completion and not using Cursor

I use Windsurf so I remain in the driver's seat. Using AI coding tools too much feels like brain rot where I can't think sharply anymore. Having auto complete guess my next edit as I'm typing is great because I still retain all the control over the code base. There's never any blocks of code that I can't be bothered to look at, because I wrote everything still.

Just cancelled my Cursor sub due to claude code, so heavily agree.

> - Tab completion model (Cursor's remaining moat)

My local ollama + continue + Qwen 2.5 coder gives good tab completion with minimal latency; how much better is Cursor’s tab completion model?

I’m still weary of letting LLM edit my code so my local setup gives me sufficient assistance with tab completion and occasional chat.

And open source tools like aider are, of course, even more validated and get more eyes.

Plus recently launched OpenCode, open source CC is gaining traction fast.

There was always very little moat in the model wrapper.

The main value of CC is the free tool built by people who understand all the internals of their own models.

Windsurf big claim to fame was that you could run their model in airgap and they said they did not train on GPL code. This was an option available for Enterprise customers until they took it away recently to prevent self hosting

Unless I’m understanding it wrong, the Tab Completion in Cursor isn’t a moat anymore.

VSCode & CoPilot now offer it.

Is it as good? Maybe not.

But they are really working hard over there at Copilot and seem to be catching up.

I get an Edu license for Copilot, so just ditched Cursor!

I think CC is just far more useful; I use it for literally everything and without MCP (except puppeteer sometimes) as it just writes python/bash scripts to do that far better than all those hacked together MCP garbage bins. It controls my computer & writes code. It made me better as well as now I actually write code, including GUI/web apps, that's are always fully scriptable. It helps me, but it definitely helps CC; it can just interrogate/test everything I make without puppeteer (or other web browser control, which is always brittle as hell).

CC would explode even further if they had official Team/Enterprise plan (likely in the work, Claude Code Waffle flag), and worked on Windows without WSL (supposedly pretty easy to fix, they just didn't bother). Cursor learnt the % of Windows user was really high when they started looking, even before they really supported it.

They're likely artificially holding it back either because its a loss leader they want to use a very specific way, or because they're planning the next big boom/launch (maybe with a new model to build hype?).

Kilo Code CEO here. This is why open source is so important!!

Cursor's multi-file tab completion and multi-file diff experience are worth $20 easily IMO.

I truly do not understand people's affinity for a CLI interface for coding agents. Scriptability I understand, but surely we could agree that CC with Cursor's UX would be superior to CC's terminal alone, right? That's why CC is pushing IDE integration -- they're just not there yet.

Almost all of this was true before they even announced the purchase. I was so shocked and now I’m not surprised it fell through

I've tried all the CLI and vscode with agent mode (and personally I prefer o4-mini) is the best thing out there.

I strongly agree with you. I’m more of a CLI guy, and Claude Code just works. Most good projects have a CLI anyway (gcloud, GitHub CLI, Vercel, etc.). I prefer CLI vs MCP’s. I’m on the $200 plan, and it’s absolutely worth it (never thought I’d say this for a CLI app).

I don’t see how there will be any money to be made in this industry once these models are quantized and all local. It’s going to be one of the most painful bubble deflations we have ever seen and the biggest success of open source in our lifetimes.

The forked IDE thing I don't understand either, but...

During the evaluation at a previous job, we found that windsurf is waaaay better than anything else. They were expensive (to train on our source code directly) but the solution the offered was outperforming others.

thats not a fair comparision CC is

agentic tool + anthropic subsidized pricing.

Second part is why it has "exploded"

>What does Cursor/Windsurf offer over VS Code + CC?

A lot of devs are not superstar devs.

They don't want a terminal tool, or anything they have to configure.

A IDE you can just download and 'it just works' has value. And there are companies that will pay.

Good analysis. And Claude code itself will be mercilessly copied, so even if another model jumps ahead, small switching cost.

That said, the creator of Claude Code jumped to Cursor so they must see a there there.

does claude code have a privacy mode with zero data retention?

Cursor - co-pilot/AI pair programming usecases.

Claude Code - Agentic/Autonomous coding usecases.

Both have their own place in programming, though there are overlaps.

I do agree, Claude Code absolutely changed the game. It is outstanding.

Is Claude code expensive? Can you control the costs or can it surprise you.

Is the case for using Claude Code much weaker now that Gemini CLI is out?

Since then OpenAI has released Codex as well (the web one)

for those who seldom use the terminal, is Claude Code still usable? I heard it doesn't do tab autocomplete in IDE like Cursor

I too am an engineer that thinks CLI's are cool, but if you believe it's even remotely as useful as an IDE then give me a break.

As far as I can tell, terminal agents are inferior to hosted agents in sandboxed/imaged environments when it comes to concurrent execution and far inferior to assisted ide in terms of UX so what exactly is the point?. The "UI niceties" is the whole point of using cursor and somehow, everyone else sucks at it.

Forking an IDE is not expensive if it's the core product of a company with a $900M ARR.

I doubt MS has ever made $900M off of VS Code.

The “leftover” employees at Character were NOT screwed over. Options were converted to cash at the deal’s valuation.

Hopefully Windsurf employees are treated well here.

Note: I worked at Character until recently.

> I wonder how the founders justify going along with it

$2.4 billion.

The rank and file equity pitch is quickly falling apart…

FYI, It wasn't taken the money and leave, a lot of them got absorbed into GDM.

Source: I was in GDM when character was acquired.

> Unfortunate for any employees who aren't founders or researchers, as they don't get any payout or a nice new job from this exit structure. In fact they lose their whole time invested at the company.

Windsurf’s value didn’t go to $0 overnight. The company will continue and their equity is likely still worth a decent amount wherever the company ends up.

Obviously a disappointing outcome for the people who thought life changing money was right around the corner, but they didn’t lose everything.

Just like with Character I'm assuming the employees get something. Whatever nonsense "licensing" fee Google is paying to not cause an antitrust investigation should be paid out straight to employees

Not really true, I believe the "acquiring" (i.e. Google) company buys some equity from the employees (windsurf).

Edit: the people downvoting this clearly can't read, I made the exact same point as jonny_eh.

This might be the beginning of the end of tech VC startups in general.

High interest rates make VC funding more expensive and now bigtech can swoop in, poach all the necessary staff and deprive investors of an exit.

What is the point any more?

I'm curious to see what you've built with all that extra productivity.

> But I don’t review files that much anymore.

Say no more.

yes vibecoding is addicting like that. but if you are not reviewing any code and simply vibing then in my expreience you'll eventually get stuck in "its still not working" loops beause you have no other context or insight to provide it other than that. Then you have either accept what you have or throw the whole thing out and/or actually read the code . kind of rules out last option because code is now just too far gone with too many special cases hardcoded because AI sucks at abstraction or real software engineering.

> I don’t review files that much anymore

You don't review the code? Just test it works?

When generating code that is often wrong and needing to review it, and IDE is demonstrably better, this isn't an argument

Curious - how did moving from iTerm2 to Ghostty help? I currently use iTerm2 and have never used Claude Code

Try again. No self respecting Emacs user would ever call vim “good”.

> It’s so good that I complete the work of weeks and months within days

and yet you're pulling 14 hour workdays..

IDEs were a crutch, and now that crutch has been replaced by a semi-autonomous bot that can fetch and carry.

>Migrated from iTerm2 to Ghostty and Tmux

Would love to hear more.

Do you do all this switching during the workday?

There is no moat. If you’re a true believer that strong agents are around the corner, then all of these add on companies will be obsolete in a few years. The first company to strong agents can trivially rebuild Cursor or Windsurf.

I think the recent Grok release and considering xAI was relatively late to the game shows that the only moat to training giant models is how many GPUs you can buy. ChatGPT was earth-shattering and it took less than two years for multiple credible competitors to match or exceed them. Making these models profitable is proving extremely difficult in the face of so much competition and such unsustainable expectations being set. Google seems to be most likely to sustain themselves through this melee. Them and the Chinese companies.

It feels like we're watching a hype cycle in real time

Cursor just committed mass consumer fraud at worst, and at best pissed off all their best customers. I feel really sorry for those who invested at a 9bb valuation.

I seriously cannot keep up. I fell a bit behind and now I feel I need a primer to know who owns/acquired/developed all these additional things surrounding the ai space

What was Garry's post?

Gary gives off a grifter vibe to me. Such a shame seeing how YC has fallen

Yep, if investors and early employees keep getting left out in the cold while execs get a soft landing at Big Tech, it's going to shake a lot of trust in the startup game

Likely cheaper too. Nothing to pay the original shareholders

Can shareholders sue? I presume the only avenue is IP since that belongs to the company? Or the non-exclusive license somehow negates that? Brutal.

I’m honestly just surprised that the CEO and co-founder decided to walk away from the company and leave behind all these employees he was leading. Especially considering many of them probably joined for lower pay, hoping for a big upside.

Maybe there’s more to the story.

It's been working with software developers with no issues.

“Buying the startup” just means handing over megabucks to do-nothing investors. If Google isn’t buying any product or technology, why should investors get a talent fee?

The big players know regulators are watching, so they're doing everything but the formal acquisition

This is the direct result of regulations. As usual regulations backfire. Expect more regulations to address this, surely they won’t backfire as well.

There are many AI startups and we are just in the beginning of learning how to use them. There will be some stupid company like those you’ve listed that figures out a way to use AI that is far better than any other implementation, and Google, Meta, and Microsoft may go the way of Yahoo and AOL, but we’ll see

It was barely better than Cursor and they got shafted by Anthropic because of the takeover announcement so nobody really used it anymore because let's face it - Claude Sonnet is just the best coding model. Design-wise the chat panel and autocomplete integration was a bit nicer than in Cursor but not by much. Subscription for Windsurf was/is also 5$ cheaper.

Everyone has a niche, Windsurf is the only large provider if you are a Jetbrains shop.

There are some alternatives like continue.dev or Jetbrains own AI offering but no Cursor or Claude Code ( Sonnet 3.7/4) you can get through Jetbrains plugin or others, but Anthropic does not provide support same with cursor.

Windsurf was also used by enterprises because of their on-prem plan. They gutted that after OpenAI acquisition was announced and since then I am sure none of those enterprises that used it will switch to their cloud offering and look for other venues.

It’s the modern day dotcom boom and all these agents are the modern day Dreamweaver.

I was on Windsurf's grandfather $10 per month plan, it was really good during the Sonnet 3.5 and 3.7 days

I am still a paid subscriber but most of my usage is claude code now becaue Windsurf does not Sonnet 4 included in their plan.

I used it for about six weeks in the spring, at which point I tried cursor and found out that it was far better for my use case (backend Go): better and faster autocomplete that can work across files, less buggy UI, and it actually follows your rules.

I’m not bothered by this news — it’d be pretty shortsighted to assume that any of these disposable AI assistants will continue to exist forever.

The first time they hit the news, I’ve tried to open their website to see what it was all about and it froze my phone lol

Well I use Windsurf. It's a good alternative to GitHub Copilot. The free tier is on par with Copilot's paid plan.

...which no one talks about anymore. Okay I guess you have a point.

Base44 is absolutely not garbage. I’ve tried it and can say it’s as good or better of a vibe-builder than Lovable or Bolt. Have you benchmarked it against the competition or can you otherwise substantiate the “garbage” claim? FWIW I do know one amazing engineer using Windsurf

Are the AI capabilities tapering-off, or commoditized? Building the next Windsurf (iteration 0) doesn't feel it's quite niche anymore.

If by Documentary, you mean a new Silicon Valley sitcom, yes , all the ingredients are there: The AGI believers, the doomers, the "cure all diseases" people, the board drama, the money grabbers, the VC dance , the poaching, the lawsuits for copyrights ... there s a whole new universe of caricatures

I know David Fincher is jumping on his seat

Obviously these things are difficult to tell from the outside

Apparently somebody missed crypto mania between 2019-2022

Gary-Marcus-eating-popcorn.gif

> if AI capabilities taper off

AI growth has slowed to a crawl, and it's priced it self out vs cost of compute.

NVIDIA feels a lot like SUN.

> amazing documentary

Been there, done that: 2001, Startup Dot Com https://www.youtube.com/watch?v=cP4PGjnZwJE

It is always the case that the employees get screwed

Those wrappers are gonna go away now that there's Claude Code and Googles CLI thing. They are that much better.

Similar thing to what we’ve witnessed with crypto coins. It’s AI season and those with money invest in it, pump it and will exit post IPO. Difference here is, that besides value that those products “hold”, it’s possible also to provide AI as a service, making Google / Microsoft etc interested.

> I just can't see how AI code editors like Windsurf or Cursor, without any proprietary model, can be valued at billions.

Windsurf used to be GPU rental company before they decided to make a text editor. I imagine they own a lot of silicon they are running their coding assistant on.

https://www.afp.com/en/infos/windsurf-launches-first-gpu-clu...

It's not a rinky-dinky startup that just forked VS Code in a month.

They sell stuff that actually works, and people who use it convince people who pay money to pay for it.

They both have proprietary models.

Maybe Google sees something under the hood

If they acquire a company they might need approval due to anti-trust.

If the people instead just quit their jobs and start working at Google … nothing to see here.

Apparently OpenAI allowed the deal to expire; likely Google had already been in discussion with Windsurf as I'm sure they knew the deal was likely to die well before today.

MS probably killed the deal, MS wanted access to Windsurf to make Co Pilot better while OpenAI did not want to give them access.

Why the quotes? Consultants are indeed hired for consulting work to be done.

Cursor does add value but it's just a thin layer on top of VSCode so companies could just build that in-house and don't need to acquire. There's no moat there.

Before being known as Windsurf it was Codeium - the only good free autocomplete extension for VS Code and Jetbrains ides.

Derp. Weird IP sharing issues.

> I did not see this coming. Wow. The game of thrones in SV.

You must be new around here.

Very standard yep. Sales folks are sort of trained /indoctrinated into telling white lies like that in order to get in the door. There are loads of examples of using fake momentum to close deals. If its a senior person it’s “My CEO asked me to personally reach out to you” or a fake email from the CEO forwarded by the rep. If one person at the company uses it, it’s “we’re negotiating a company wide license” or “we already have a group license with extra seats” or “one of your teammates sent us a list of priority teammates” yada yada.

Google is paying $2.4billion to them

Where do you think Codex lags behind Claude Code?

The "Son of Anton" was an coding agent that deleted the entire codebase. Not so far off from Cursor's YOLO mode, is it?

https://news.ycombinator.com/item?id=44262383

Why ? we get to watch the original reality show in real time, for free!

Even the original Silicon Valley didn’t match the zaniness of real life. Why do we need a reboot? Just check HN!

Enterprise is where you make the money. I’m sure they will have something soon.

For now, i can just piggybacking on bedrock or vertex which is peanuts comparing to production cost.

A small company can just pay the $250 a month for X number of employees to each have CC max plan. Not that complicated

Maybe the expectation that a job leading to an equity windfall is something people should be more cautious about.

Like in WeCrashed (2022)?

Perhaps it as combination of how much founders were diluted and how much they are being offered upfront. We are hearing about $100M signing bonuses.

It is hard to say no when Google/Meta gives you say $100M upfront and hundreds more if not Billion+ in RSUs. After 3 rounds it is not unreasonable to have only 5-10%.

10% of a company worth a few billion burning a lot of cash, that needs to keep raising more rounds i.e more dilution, may have less value than RSUs from multi-trillion dollar publicly traded liquid tech company today.

It is also quite hard to raise $5-10+Billion in cash. There are only handful of startups which have ever done so

Very few funds/investors can afford to do so large rounds. This was SoftBank's thesis for most of last decade, compete by just outfunding competing products in a market.

The deal for the founders may not have been as good as what Google offered. They may only hold 10% after those rounds, a serious part of the acquisition price could go to liquidation preferences of the VCs and the deal is mostly in OpenAI stock instead of cash. Not that hard to imagine the Google option offering them much more actual cash right now.

Nepotism.

The same set of rules that apply to you and me are not universal.

> Bloomberg reports that Google is paying $2.4 billion to license Windsurf’s technology and hire its top employees.

Sounds like they're getting a payoff but probably not what they had in mind with the much larger numbers being thrown around for AI.

The culture of the people involved got us to this point, I’m not sure it’s the solution to the problem.

> The progressive spin would be to now ban acquihires somehow, and then whatever new legal invention will be created next.

Progressive has become a moving target, but the pro-competition view would be to break up the massively concentrated companies that are further consolidating markets. Thats what the Khan FTC was trying to do, but we need a Congress interested in a competitive marketplace, which we haven’t had in a while.

This wasn't a result of regulator scrutiny. The issue was that MS (owner of Copilot) was demanding access to the IP (due to their existing agreement with OpenAI), and OpenAI was resisting. In addition, Claude blocked access to Windsurf, which also damaged them as an acquisition target.

Nothing to do with regulators.

I don't understand why Windsurf would care after they've exited.

This isn’t a great look for OpenAI, but acquisitions fall through all the time.

The issue isn’t an acquisition not working out, it’s that the founding/exec team felt it appropriate to arrange their own exits and abandon their team before even communicating that their “successful exit” wasn’t actually happening.

They have got get their act together from a structure standpoint or these types of acquisitions are going keep failing.

It's somewhat telling that the most valuable part of an company is the people, some things don't change

This is why working for startups is not worth it.

This.

Could be conditional on DD and deliverables

The police is to blame for trying to enforce the law, it makes criminals innovate is exactly the kind of take I come here for.