Google Acquires Windsurf Technology for $2.4B, OpenAI Deal Falls Through

OpenAI's acquisition of Windsurf has fallen through, and Google is reportedly licensing Windsurf technology for $2.4B. The deal with OpenAI was for AI-assisted coding, but details of the Google agreement are not specified.

In a significant move, Google has acquired a non-exclusive license to technology from AI-coding startup Windsurf for a reported $2.4 billion. This deal, announced on July 11, 2025, also includes the recruitment of Windsurf's CEO Varun Mohan, co-founder Douglas Chen, and select R&D team members into Google DeepMind [1]. The acquisition is part of a growing trend among tech giants to sidestep regulatory scrutiny by licensing technology and hiring top talent rather than outright acquisitions [2].

OpenAI had been in talks to acquire Windsurf for around $3 billion, aiming to regain ground in the fast-growing market for AI-powered coding tools. However, the deal reportedly fell apart due to contract renegotiations with Microsoft, which already holds access to OpenAI's intellectual property [1]. OpenAI was unable to secure an exception for Windsurf, leading to the collapse of the deal.

Windsurf, previously known as Codeium, had reached an annual recurring revenue (ARR) of $100 million in April 2025, making it one of the hottest AI coding startups on the market. The company's technology has been in high demand, with major tech firms vying for its capabilities [1].

Following the leadership exits, Jeff Wang, Windsurf's head of business, has stepped in as interim CEO. Most of the 250-person team will continue focusing on enterprise AI coding tools, but the company's long-term trajectory remains uncertain. Similar reverse-acquihire startups like Scale AI and Inflection have struggled to maintain momentum post-deal [1].

Google's acquisition of Windsurf's technology and talent positions it well to capitalize on the trend of AI model providers offering AI coding applications to entice developers. The deal is expected to significantly boost Google's ability to build AI coding tools and stay competitive in the AI race [1].

References:
[1] https://techcrunch.com/2025/07/11/windsurfs-ceo-goes-to-google-openais-acquisition-falls-apart/
[2] https://the-decoder.com/openai-loses-out-as-google-hires-windsurfs-ceo-and-top-talent/