Microsoft Ends China-Based Tech Support For Pentagon Projects Amid National Security Backlash – Microsoft (NASDAQ:MSFT)

On Friday, Microsoft Corp. MSFT said it will no longer use China-based engineers to provide technical support for U.S. military cloud services, following an explosive ProPublica report and swift backlash from Washington.

What Happened: The ProPublica investigation revealed that Microsoft had employed engineers based in China to assist on cloud systems used by the U.S. military, reported Reuters.

These engineers worked under U.S. subcontractors known as “digital escorts,” who held security clearances but reportedly lacked the technical expertise to monitor potential cyber risks.

Microsoft, a major U.S. defense contractor, told ProPublica that it had disclosed these practices to the government as part of its authorization process.

On Friday, Microsoft spokesperson Frank Shaw posted on X, formerly Twitter, saying the company “changed how it supports U.S. government customers… to assure that no China-based engineering teams are providing technical assistance” on Pentagon-related services.

See Also: Microsoft To Roll Out AI Copilot For Pentagon By Summer 2025, Tailoring Productivity Tool For High-Security Government Use: Report

Why It’s Important: The controversy escalated when Sen. Tom Cotton (R-Ark.), chair of the Senate Intelligence Committee, sent a letter to Defense Secretary Pete Hegseth demanding transparency, the report noted.

“The U.S. government recognizes that China’s cyber capabilities pose one of the most aggressive and dangerous threats to the United States,” Cotton wrote.

“We must guard against all potential threats within the supply chain, including from subcontractors.”

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Shortly after, Hegseth announced a two-week review of all Department of Defense cloud service contracts, pledging to root out any further Chinese involvement.

“China will no longer have any involvement whatsoever in our cloud services, effective immediately,” he said in a video posted on X.

The revelations come amid heightened scrutiny of Chinese cyber activities and underscore the growing tension between national security and globalized tech labor.

Price Action: Microsoft shares have risen 21.85% so far this year and are up 16.69% over the past 12 months. On Friday, the stock slipped 0.32% during regular trading but ticked up 0.016% in after-hours trading, according to Benzinga Pro data.

Benzinga’s Edge Stock Rankings show that MSFT maintains consistent upward momentum across short, medium and long-term periods. While it scores strongly on momentum, its value rating remains relatively weaker. Additional performance metrics are available here.

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