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Microsoft stops relying on Chinese engineers for Pentagon cloud support

July 18, 2025
11:20 PM
3 min read
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The change follows a ProPublica report that outlined how Microsoft's use of Chinese engineers left U.S. defense clients vulnerable to cybersecurity risks.

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investment

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Published

July 18, 2025

11:20 PM

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CNBC

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moneystocksfinancialtechnologydefensemarket cyclesseasonal analysisgeopolitical

The re indicates that Microsoft has changed its practices to keep engineers in China from getting involved in support for U

Defense clients using the company's Azure cloud services

The announcement came days after Publica published an extensive report describing the Defense Department's dependence on Microsoft software engineers in China

Nevertheless, Microsoft originally told Publica that employees and contractors were operating in adherence to U

On the other hand, Government rules

In this articleMSFT your favorite stocksCREATE FREE ACCOUNTMicrosoft Chairman and Chief Executive Officer Satya Nadella (L) returns to the stage after a pre-recorded interview during the Microsoft Build conference opening keynote in Seattle, Washington on May 19, 2025

On the other hand, Jason Redmond | AFP | Getty ImagesMicrosoft on Friday revised its practices to ensure that engineers in China no longer vide nical support to U

Defense clients using the company's cloud services, in today's financial world

The company implemented the changes in an effort to reduce national security and cybersecurity risks stemming from its cloud work with a major customer

The announcement came days after Publica published an extensive report describing the Defense Department's dependence on Microsoft software engineers in China. "In response to concerns raised earlier this week US-supervised foreign engineers, Microsoft has made changes to our support for US Government customers to assure that no China-based engineering teams are viding nical assistance for DoD Government cloud and related services," Frank Shaw, the Microsoft's chief communications officer, wrote in a Friday X post, in today's market environment

The change impacts the work of Microsoft's Azure cloud services division, which analysts estimate now generates more than 25% of the company's revenue (this bears monitoring)

Nevertheless, That makes Azure bigger than Google Cloud but smaller than Amazon Web Services, given current economic conditions

Microsoft receives "substantial revenue from government contracts," according to its most recent quarterly earnings statement, and more than half of the company's $70 billion in first-quarter revenue came from customers based in the U

In 2019, Microsoft won a $10 billion cloud-related defense contract, but the Pentagon wound up canceling it in 2021 after a legal battle (quite telling)

In 2022, the department gave cloud contracts worth up to $9 billion in total to Amazon, Google, Oracle and Microsoft

Publica reported that the work of Microsoft's Chinese Azure engineers is overseen by "digital escorts" in the U

Furthermore, , who typically have less nical wess than the employees they manage overseas

Market analysis shows report detailed how the "digital escort" arrangement might leave the U

Meanwhile, Vulnerable to a cyberattack from China

However, On the other hand, "This's obviously unacceptable, especially in today's digital threat environment," Defense Secretary Pete Hegseth said in a posted to X on Friday

He described the architecture as "a legacy system created over a decade ago, during the Obama administration. " The Defense Department will review its systems in for similar activity, Hegseth said

Nevertheless, Microsoft originally told Publica that its employees and contractors were adhering to U

Government rules, amid market uncertainty

Conversely, "We remain committed to viding the most secure services possible to the US government, including working with our national security partners to evaluate and adjust our security tocols as needed," Shaw wrote (quite telling)

WATCH: Microsoft Security VP Vasu Jakkal talks cybersecurity with Jim Cramerwatch now8:4508:45Microsoft Security VP Vasu Jakkal talks cybersecurity with Jim CramerMad Money with Jim Cramer.