Microsoft eyed buying Cursor before SpaceX option deal, sources say

Microsoft explored a potential acquisition of AI coding startup Cursor in the weeks before SpaceX announced an agreement giving it the right to acquire the company later this year, according to people familiar with the matter cited by CNBC. The review did not result in a formal bid.

Sources say Microsoft conducted diligence on Cursor as the startup was simultaneously in talks for a large funding round, reported to be roughly $2 billion, and drawing investor interest on the back of rapid enterprise adoption. SpaceX publicly disclosed an arrangement in which it holds the option to buy Cursor for $60 billion or, alternatively, to pay $10 billion for collaborative work if it declines to exercise the purchase right.

Reported detail indicates Microsoft’s interest centered on Cursor’s developer-facing tools, enterprise contracts and its fast-growing revenue trajectory. The company ultimately chose not to submit an offer, while SpaceX’s option structure effectively removes Cursor from competitive auction dynamics for the near term.

Market implications are notable: major cloud and software incumbents are aggressively seeking to secure developer tooling and coding AI capabilities, and the SpaceX arrangement shifts the competitive landscape by limiting other bidders. The structure of the deal — an option to acquire rather than an immediate purchase — also raises questions about strategic timing around SpaceX’s broader corporate plans.

Analysts say Microsoft’s review underscores how valuable coding-focused AI platforms have become to large tech ecosystems. The episode could influence valuation expectations for AI-native developer tools and reshape bargaining positions in upcoming funding rounds or sale processes. Regulatory scrutiny or governance considerations tied to large, pre-IPO transactions could also emerge as factors.

In short, Microsoft’s preliminary interest and SpaceX’s high-profile option reflect heightened M&A activity in AI tooling. Cursor’s fate in the coming months — whether it proceeds with renewed fundraising, accepts a purchase, or remains independent — will be watched closely by investors and rivals alike.