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OpenAI’s Windsurf deal is off, and Windsurf’s CEO is going to Google

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776 points rcchen | 3 comments | 11 Jul 25 21:35 UTC | HN request time: 0.42s | source
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extr ◴[11 Jul 25 22:21 UTC] No.44537358[source]▶
IMO other than the Microsoft IP issue, I think the biggest thing that has shifted since this acquisition was first in the works is Claude Code has absolutely exploded. Forking an IDE and all the expense that comes with that feels like a waste of effort, considering the number of free/open source CLI agentic tools that are out there.

Let's review the current state of things:

- Terminal CLI agents are several orders of magnitude less $$$ to develop than forking an entire IDE.

- CC is dead simple to onboard (use whatever IDE you're using now, with a simple extension for some UX improvements).

- Anthropic is free to aggressively undercut their own API margins (and middlemen like Cursor) in exchange for more predictable subscription revenue + training data access.

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

- Tab completion model (Cursor's remaining moat)

- Some UI niceties like "add selection to chat", and etc.

Personally I think this is a harbinger of where things are going. Cursor was fastest to $900M ARR and IMO will be fastest back down again.

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1. threecheese ◴[12 Jul 25 00:50 UTC] No.44538316[source]▶
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.

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2. extr ◴[12 Jul 25 05:51 UTC] No.44539652[source]▶
I was being hyperbolic saying their ARR will go to zero. That's obviously not the case, but the point is that CC has revealed their real product was not "agentic coding UI", it was "insanely cheap tokens". I have no doubt they will continue to see success, but their future right now looks closer to being a competitor to free/open tools like cline/roo code, as well as the CLI entrants, not a standalone $500M ARR juggarnaut. They have no horse in the race in the token market, they're a middleman.

They either need to create their own model and compete on cost, or hope that token costs come down dramatically so as to be too cheap to meter.

3. hv23 ◴[12 Jul 25 14:17 UTC] No.44542250[source]▶
Digging in here more... why would you say it isn't in Anthropic's interest to win the "agentic coding UI" market?

My mental model is that these foundation model companies will need to invest in and win in a significant number of the app layer markets in order to realize enough revenue to drive returns. And if coding / agentic coding is one of the top X use cases for tokens at the app layer, seems logical that they'd want to be a winner in this market.

Is your view that these companies will be content to win at the model layer and be agnostic as to the app layer?