Will VSCode beat Cursor & Windsurf in the long term?
Is Microsoft able to use platform advantage and licensing restrictions to block competitors. Yes but will they?
AI Code Editor War Intensifies
The new booming AI code editing space has intensified as one of the most shifting and profitable new technology spaces adjusts to each other’s competition. Visual Studio Code is currently the most dominant code editor.
“Visual Studio Code is used by more than twice as many developers than its nearest (and related) alternative, Visual Studio.” — Stack Overflow survey
Visual Studio Code is free and the way they make money is through their GitHub Copilot integration. This integration has recently seen some giant competition with forks Cursor, Windsurf, and the extension Augment Code. If you are like me you probably thought these were small company startups but make no mistake these are heavily venture backed (Collectively these companies have funded $538M+ through VC’s).
Microsoft isn’t standing still and allowing their pie to be eaten as
Maximilian Schwarzmüller puts it. Microsoft has answered back with it’s March v1.99 update, they have shown two powerful moves that could shift the tides in their favour. Is this the beginning of the end for Cursor and Windsurf?
VSCode Answers back with Agent Mode
Microsoft has come out swinging with it’s main new feature being Agent Mode the answer to the LLM Agent tool calling that made Cursor & Windsurf so attractive in the first place.
Agent mode new features include:
- Prompt to modify your codebase
- Fetch web content for context
- Read your codebase for additional context
- Ability to run the terminal
The biggest difference is in the fact that they are able to natively integrate into the core of VS Code that 73.6% of all users report to be using.
While the update is a massive move forward it is still flawed, many developers have reported that the Agent mode feels rough. In my own experience, I’ve seen quite a lot of issues compared to alternatives especially around TypeScript types. The agent seems to fail at some surprisingly simple tasks, but this is what is to be expected.
“I played around with it this weekend and also with Windsurf again just to validate if it’s just GitHub Copilot, and for me, it consistently fails at simple tasks if it’s more than just adding an individual feature or just doing this one refactor.” — Maximilian Schwarzmüller
Microsofts Ultimate Strategy
Microsoft’s VSCode team isn’t sitting back idle and has been shipping very fast with many monthly update. What makes their strategy interesting is they aren’t just competing on the features but they are leverage their platform. Here are two key ways they are doing so:
1. Use of their Large existing team
The VSCode team isn’t small and with this we can see in the March update alone how much they were able to ship. Along with the Agent mode here is what else they introduced:
- Next edit suggestions
- Model context protocol server support
- Using your own models like Claude, Gemini, or local LLM’s like Ollama
- Tooling to Microsoft suite products
2. VSCode Extension Marketplace
The thing that has been hidden in the weeds is Microsoft’s enforcement of their licensing restrictions that have already existed but are now being leveraged against competitors. VSCode is blocking forks like Cursor and Windsurf from using extensions that are shared through the VSCode marketplace.
This is important as the extension ecosystem is one of the biggest pulls for using VSCode in the first place. With the ability to cut these forks off from using the extensions they leave competitors in a very difficult place.
Can Microsoft use their Secret Weapon
VSCode has grown a massive open source community loving the fact that itself is open source and the extension marketplace is also massively open source. This has allowed them to push their Copilot product so far.
What would happen if Microsoft enforced this legal license? How would the developer community react to them deliberately cutting off a largely seen positively impacting ecosystem of AI code editor alternatives?
By downloading, installing and using the C/C++ Extension, you agree to the terms of this license… you may not use, copy, modify, merge, publish, distribute, sublicense, and/or sell copies of the Software, in any form, through any means, including but not limited to isolation for use in a competing IDE or editor…
Many think that the plan isn’t to cut off Cursor and Windsurf, but rather protect against sketchy VSCode forks that will eventually make their way to the market and this IMO wouldn’t be a bad thing for them to do. Imagine a Cursor clone that sends all your data without you knowing.
Who Will Win?
When thinking of the future it is easy to come up with wild theories but let’s break it down and think of the most likely.
Microsoft VSCode
- Resources. Microsoft has a lot more engineers than VC backed companies.
- User base. Not just in the IDE but the tooling Microsoft suite.
- Extensions. They host the extensions on their platform.
- Legal Leverage. At the end of the day they have the hammer.
Cursor & Windsurf
- Agility. They can move faster without as many restrictions.
- Funding. This might seem weird as Microsoft has more money but this money isn’t put straight into the VSCode team.
- Community. Not a mixed community this community is solely focused on the cutting edge.
Most Likely Things to Occur
VSCode and Copilot is going to continue to catch up and for them they don’t need to overtake their competition, they are the native trusted experience and when there isn’t much difference people will lean towards this experience. This puts Cursor & Windsurf into a hard spot where they need to keep adding features and alarming rate.
Some have thought that Microsoft will use this license to their advantage but I would have to disagree there, the damage this would cause is too great and from Microsofts stand point they don’t need to. We all saw what happened to Unity when they pressed the legal advantage.
The Future is For Developers
You can never predict the future especially when it comes to AI, Microsoft shows a clear interest in the AI code editor space and isn’t leaving it for grabs.
We can be sure of one thing, the competition is nothing but positive for us Developers, in the long run these tools forcing VS Code to rapidly improve their AI pipeline helps us.
Have you used VSCode’s new agent mode or Cursor/Windsurf? Do you have any questions or advice let me know in the comments!
