Cognition Acquires Windsurf - Expanding AI Coding Capabilities

Cognition Acquires AI Coding Startup Windsurf

Cognition, the company responsible for the groundbreaking AI coding agent Devin, has announced a definitive agreement to acquire Windsurf, an AI coding startup. This news was revealed in a blog post published by Cognition on Monday.

Google's Prior Pursuit and the Shift in Momentum

This acquisition follows closely on the heels of Google’s recruitment of Windsurf’s CEO, Varun Mohan, co-founder Douglas Chen, and key research personnel. The move, valued at $2.4 billion in a reverse-acquihire, left a significant portion of Windsurf’s 250-employee team unassigned. Previously, OpenAI had pursued Windsurf with a $3 billion acquisition offer, which ultimately expired, opening the door for alternative possibilities.

The Growing Demand for AI-Powered Coding Tools

The intense interest surrounding Windsurf underscores the escalating competition within the AI coding tool development sector. Specifically, there's a surge in demand for AI-powered integrated development environments (IDEs), such as those offered by Cursor and Windsurf. The market for these AI-driven IDEs has experienced substantial growth, with Cursor’s annualized recurring revenue (ARR) reaching $500 million in recent months.

A Turbulent Transition for Windsurf

Jeff Wang, Windsurf’s former head of business, now serving as interim CEO, described the past 72 hours as an “incredible rollercoaster ride” in a LinkedIn post. He expressed the team’s enthusiasm about joining Cognition, citing shared vision, user commitment, and aligned values.

Details of the Acquisition

Cognition is acquiring Windsurf’s intellectual property (IP) and product suite, including its AI-powered IDE, along with all employees who were not recruited by Google. The financial terms of the acquisition were not disclosed.

Windsurf’s Financial Performance

Cognition reports that Windsurf achieved an ARR of $82 million, with enterprise ARR doubling each quarter. The startup boasts a user base of at least 350 enterprise customers and “hundreds of thousands” of daily active users.

Integration Plans and Future Development

Initially, Windsurf’s team will continue to focus on its existing AI-powered IDE. Simultaneously, Cognition will continue development of its AI coding agent, Devin. The companies plan to eventually integrate Windsurf’s IP and capabilities into Cognition’s product offerings.

Previous Challenges and Claude AI Access

Reports from April indicated Windsurf’s ARR had peaked at $100 million. However, in June, Anthropic restricted Windsurf’s access to its Claude AI models, reportedly due to speculation about an OpenAI acquisition. This led some Windsurf customers to switch to alternative services, like Cursor, that maintained Claude AI access.

Restored Access to Claude AI Models

Cognition has confirmed that Windsurf will regain full access to Claude AI models following the acquisition.

Concerns Regarding Google’s Reverse-Acquire

Recent reports highlighted that Windsurf employees who joined the company within the last year did not receive payouts in Google’s reverse-acquihire deal. This sparked criticism on social media, with many suggesting the benefits primarily accrued to investors and startup leaders.

Rapid Deal Closure

Russell Kaplan, Cognition’s president, revealed on X that the Windsurf acquisition materialized quickly, with the initial call taking place after 5 p.m. on Friday and the agreement finalized by Monday morning.

Financial Participation for Windsurf Employees

Cognition emphasizes that all Windsurf employees will financially benefit from this deal, with vesting cliffs waived for their past contributions.

Strengthening Cognition’s Competitive Position

The addition of Windsurf’s talent and IP positions Cognition as a stronger competitor against industry giants in the AI coding space, including OpenAI, Anthropic, and Cursor. Cognition was previously reported to be in discussions to raise hundreds of millions of dollars at a $4 billion valuation.

The Evolution of AI Coding Agents

Cognition was among the first to introduce a fully-fledged AI coding agent, Devin, designed to automate coding tasks as if performed by a junior software engineer. This approach differed from Cursor and Windsurf, which focused on providing developers with easy access to AI tools. Initial reviews of Devin indicated some inaccuracies, suggesting the technology was nascent.

Convergence of AI Coding Approaches

However, Cursor and Windsurf have recently begun offering more agentic AI products, mirroring Cognition’s capabilities. Cursor CEO Michael Truell anticipates that AI reasoning models will advance sufficiently to handle 20% of coding workflows by 2026.

A Combined Offering: Agents and IDEs

Now, Cognition possesses the ability to offer both AI coding agents and an AI-powered IDE, potentially enhancing its overall value proposition. The company has also recently secured Goldman Sachs as a major customer.

A More Formidable Competitor

The acquisition of Windsurf solidifies Cognition’s position as a significant player in the rapidly evolving AI coding landscape.

Update: A previous version of this article contained an inaccuracy regarding the immediate tasks of Windsurf’s team at Cognition. This article was updated on July 14 to clarify that the team will continue its regular work initially, with eventual integration into Cognition’s product offerings. We apologize for the error.