COSTA MESA, Calif., and REDMOND, Wash. – In a move that signals both a major shake-up and a last-ditch effort to salvage a troubled military program, Microsoft is handing over control of the U.S. Army’s Integrated Visual Augmentation System (IVAS) to Anduril Industries, a rising star in the defense tech world.
The deal, which is pending Department of Defense approval, gives Anduril oversight of IVAS production, software and hardware development, and delivery timelines—effectively taking the reins from Microsoft, which has struggled to get the AR headset program to meet military expectations. As part of the agreement, Microsoft’s Azure cloud will become Anduril’s preferred hyperscale cloud provider for AI and IVAS-related workloads.
But behind the polished press releases, this handoff raises serious questions about the state of the IVAS program, which has been plagued by technical failures, delays, and reports of soldier dissatisfaction since its inception.
From cutting-edge to cast-off: Microsoft’s struggles with IVAS
The IVAS program was originally envisioned as a game-changing augmented reality (AR) system that would give soldiers real-time data overlays, night vision, and enhanced situational awareness—all built into a ruggedized version of Microsoft’s HoloLens technology.
In 2021, Microsoft secured a $21.9 billion contract with the Army to develop IVAS, a deal that was hailed as a landmark moment for Big Tech’s entry into military contracts. But by 2022, reports started surfacing that the headsets were causing major usability issues—including nausea, eye strain, and a narrow field of view that limited effectiveness in real-world combat scenarios.
A Pentagon test report leaked in 2022 revealed that 80% of soldiers who tested IVAS reported “mission-affecting physical impairments” from wearing the device. That same year, Congress slashed IVAS funding by $350 million, citing concerns over performance.
By 2023, the Army reduced its IVAS order from 121,000 to just 6,900 units for further testing, effectively putting the program in limbo. The Army continued working with Microsoft to refine the system, but with three years of delays and lukewarm test results, patience was wearing thin.
Now, Microsoft is quietly stepping aside, handing the burden of fixing IVAS to Anduril, a defense contractor that has quickly become a major player in military AI and battlefield automation.
Anduril steps in: A tech visionary’s military ambitions
Founded in 2017 by Palmer Luckey, the controversial creator of Oculus VR, Anduril has built its reputation on AI-driven surveillance, autonomous drones, and battlefield tech designed to integrate with military and border security operations. The company’s signature product, the Lattice AI system, provides real-time drone and sensor data analysis, helping militaries automate decision-making on the battlefield.
Now, with IVAS under its control, Anduril is positioning itself as the company that will succeed where Microsoft failed—delivering a functional, battlefield-ready AR system at a lower cost and faster production scale.
Luckey, never one to shy away from bold statements, called the IVAS program “the future of mission command”, adding:
“By empowering soldiers with the tools they need to make faster, smarter decisions, we’re building a future where technology and human ingenuity combine to ensure mission success.”
Anduril’s deep ties to Silicon Valley venture capital and U.S. defense circles have helped it land massive contracts with the Pentagon, including work on border surveillance, drone swarms, and autonomous warfare systems. This latest move gives Anduril a direct role in shaping how soldiers interact with AI and AR on the battlefield—a shift that could have major implications for future warfare.
Microsoft’s quiet retreat: Is Big Tech souring on military deals?
For Microsoft, the handoff to Anduril is an unspoken admission that IVAS was not the success it hoped for. Despite winning one of the largest defense contracts in tech history, Microsoft’s struggles with adapting HoloLens for combat became an ongoing headache.
Microsoft will still provide cloud infrastructure through Azure, but ceding control of IVAS development suggests a step back from its military ambitions—or at least an effort to let a defense-focused firm take the heat if the program continues to flounder.
The question remains: Is Big Tech pulling back from military contracts, or just finding new ways to offload the risks to specialized defense startups like Anduril?
A new era of warfighting tech—or another billion-dollar bust?
The IVAS program was meant to revolutionize combat by fusing augmented reality, AI-driven decision-making, and real-time battlefield awareness. But four years in, it’s been more miss than hit, with soldiers questioning its utility and lawmakers cutting its funding.
With Anduril now in charge, the future of AI-powered soldier gear will be shaped not by a tech giant, but by a defense contractor built on automation, AI, and surveillance.
If Anduril succeeds, IVAS could finally deliver the futuristic warfighting capabilities the Army envisioned. But if the problems persist, it will go down as yet another billion-dollar misstep in the Pentagon’s long history of overpromising and underdelivering on next-gen military tech.
Either way, this is a make-or-break moment for the military’s push into AR warfare—and a critical test for whether Silicon Valley’s defense ambitions can actually deliver on the battlefield.
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