Google snatches Windsurf execs in a $2.4B deal, derailing OpenAI’s biggest acquisition yet

In a dramatic reversal that has sent shockwaves through the AI industry, Google has recruited the top executives of AI coding startup Windsurf in a $2.4 billion talent acquisition deal, just two months after Windsurf agreed to be acquired by OpenAI for $3 billion.

Google will hire Windsurf CEO Varun Mohan and co-founder Douglas Chen, along with select research and development staff, for its DeepMind AI division. Mohan, an Indian-origin entrepreneur who grew up in California and attended MIT, has led Windsurf’s transformation from Codeium into one of the hottest AI coding platforms in the market.

“Thrilled to welcome Windsurf founders Varun Mohan and Douglas Chen and some of the brilliant Windsurf engineering team to Google DeepMind,” Demis Hassabis, co-founder and CEO of Google DeepMind, said in an X post. “Excited to be working with them to turbocharge our Gemini efforts on coding agents, tool use, and much more.”

Chen, as co-founder, has been instrumental in developing Windsurf’s core technology that enables “agentic coding,” which is AI tools that go beyond simple code completion to provide autonomous software development capabilities.

The executives bring deep expertise in AI-powered development environments, having built Windsurf into a platform with several hundred thousand daily active users and approximately $100 million in annual recurring revenue.

Jeff Wang, Windsurf’s head of business for the past two years, will assume the role of interim CEO. Graham Moreno, the company’s vice president of global sales, has been promoted to president to provide additional leadership stability.

“Most of Windsurf’s world-class team will continue to build the Windsurf product with the goal of maximizing its impact in the enterprise,” Wang announced in a post on X.

The deal that unraveled

The Windsurf acquisition by OpenAI was widely reported in May as a transformative deal that would have marked the ChatGPT maker’s largest acquisition to date. However, reports indicate the deal fell apart due to a fundamental disagreement between OpenAI and Microsoft over intellectual property arrangements.

Under OpenAI’s partnership agreement with Microsoft, the software giant has extensive rights to OpenAI’s technology and any intellectual property it develops or acquires. Microsoft expected these rights to extend to Windsurf’s technology, but OpenAI refused, viewing Windsurf’s innovations as a competitive asset against Microsoft’s own GitHub Copilot coding tool.

Fortune reported that the exclusivity period for the acquisition had expired, freeing Windsurf to explore other options.

OpenAI did not immediately respond to a request for comment.

Strategic implications for AI competition

The stunning turn of events represents a major strategic victory for Google and highlights growing tensions between OpenAI and its primary backer, Microsoft, over intellectual property rights.

“Losing Windsurf’s leadership could impact OpenAI’s ability to advance its AI developer tooling, especially as GitHub Copilot continues to mature within Microsoft’s ecosystem,” said Shreeya Deshpande, senior analyst at Everest Group. “Windsurf’s expertise could have supported OpenAI’s evolution toward more autonomous development capabilities.”

For Google, the acquisition accelerates its AI coding ambitions significantly. “Google’s addition of talent from both Character.AI and Windsurf enhances its foundation,” Deshpande noted. “If integration is thoughtful and well-paced–building on DeepMind’s agentic work and Gemini’s broader platform–Google could solidify its position as a serious contender in AI developer tooling.”

Windsurf has emerged as a leading player in AI-powered software development, originally known as Codeium before rebranding in April. The startup specializes in “agentic coding” tools that enable developers to write code using natural language prompts, gaining particular traction among enterprise customers managing complex, million-line codebases.

The company’s flagship Windsurf Editor is positioned as the first “agentic IDE” (Integrated Development Environment), offering capabilities that go beyond traditional code completion to provide project-wide context awareness and autonomous task execution.

New paradigm in AI acquisitions

Crucially, Google will not take an equity stake in Windsurf, instead paying $2.4 billion in licensing fees and compensation. This “acquihire” structure allows Google to secure talent and technology access while avoiding the regulatory scrutiny that a full acquisition would attract.

“This will hopefully offer a faster, lower-regulatory-scrutiny path to securing top AI teams,” said Charlie Dai, VP and Principal Analyst at Forrester. “We will likely see more such deals for strategic AI talent, to sidestep merger reviews by regulators and jumpstart critical innovations.”

The approach reflects what analysts see as a fundamental shift in how AI companies compete. “The irony about this deal signals a shift in focus on companies ready to pay top dollars for getting access to already scarce top ‘human talent’ and IP to build AI,” said Neil Shah, VP for research and partner at Counterpoint Research.

The move has generated significant attention within the AI community. Logan Kilpatrick, a former OpenAI executive who now works at Google DeepMind, welcomed the new hires: “Big welcome to @_mohansolo and others from the Windsurf team joining DeepMind : )”

Shah compared the current talent wars to the early days of IT software and cloud computing, when similar scrambles for expensive talent led to the rise of IT outsourcing hubs. “Could this be a new ‘AI gig economy’?” he questioned, noting that companies must embrace “strategic openness” through partnerships and acqui-hires to remain competitive.

For OpenAI, the collapse represents more than just a missed acquisition opportunity. “The failed Windsurf acquisition served as a wake-up call,” Shah observed. “It exposed the vulnerabilities of being tied to a single partner and has prompted them to diversify their infrastructure providers, IP access, and customer base.”Google snatches Windsurf execs in a $2.4B deal, derailing OpenAI’s biggest acquisition yet – ComputerworldRead More