Microsoft Cuts Ties with China-Based Engineers for Sensitive U.S. Military Cloud Operations
Redmond draws a hard line on national security—while Wall Street wonders if this is just another cost-cutting stunt dressed as patriotism.
Microsoft's latest move? Yanking Chinese engineers from Pentagon cloud projects. No explanations, no sugarcoating—just a clean break from Beijing-linked talent on classified work.
The unspoken truth? This was always a ticking time bomb. Cloud infrastructure is the new battlefield, and Uncle Sam wasn't about to let potential backdoors slide—not after the last three supply-chain debacles.
Meanwhile, analysts whisper about the real motive: saving face (and dollars) before the next Congressional hearing on tech-sector 'accidental' data leaks. Because nothing says 'secure' like reactive policy changes in an election year.
ProPublica report exposes foreign oversight of U.S. military cloud
The backlash started days earlier when ProPublica exposed how Microsoft’s Azure engineers in China were helping manage parts of the Pentagon’s cloud system, with American “digital escorts” overseeing the work.
But the problem? These U.S.-based escorts often had less technical skill than the foreign engineers they were supposed to supervise. The report raised serious concerns about how this setup could open the door for cyberattacks from Beijing.
Pete Hegseth, the Secretary of Defense under Trump’s administration, said on Friday that the entire arrangement was unacceptable. “This is obviously unacceptable, especially in today’s digital threat environment,” Hegseth said in a video posted to X.
He described the entire system as outdated, saying, “It’s a legacy system created over a decade ago, during the Obama administration.” Hegseth also confirmed that the Department of Defense WOULD begin a full internal review to identify similar activity across other systems.
Microsoft’s decision affects its Azure cloud division, which analysts estimate now brings in more than 25% of its total revenue. That puts it ahead of Google Cloud in market size, though still behind Amazon Web Services.
Microsoft noted in its latest earnings that over half of its $70 billion first-quarter revenue came from U.S.-based clients, with government contracts playing a huge role.
The company had previously won a $10 billion cloud defense contract from the Pentagon in 2019. But that contract was canceled in 2021 after a legal dispute. A year later, in 2022, Microsoft was awarded part of a $9 billion joint cloud deal alongside Amazon, Google, and Oracle.
Before the ProPublica investigation, Microsoft had insisted that all of its staff and contractors followed the rules set by the U.S. government. But public scrutiny forced a quick policy reversal.
Frank, speaking again on behalf of the company, said, “We remain committed to providing the most secure services possible to the US government, including working with our national security partners to evaluate and adjust our security protocols as needed.”
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