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China-aligned hackers unleashed AI agents on 2,250+ Microsoft 365 tenants in ConnectWise supply chain attack, Microsoft says

Microsoft says China-state aligned group Storm-0940 used ARTEX, an open-source AI penetration testing framework, to automate attacks on hundreds of organizations and assesses it was behind the ConnectWise Cloud Backup compromise.

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Illustration of a swarm of AI agent bots streaming from a dark command console into hundreds of Microsoft 365 style cloud tenants, with a ConnectWise backup vault in the middle.

Key takeaways

  • Microsoft assesses China-state aligned Storm-0940 was behind the ConnectWise Cloud Backup compromise.
  • The group used ARTEX, an open-source AI penetration testing framework, to automate attacks since early September 2026.
  • More than 2,250 tenants were targeted at up to 2,900 sign-in attempts per minute.
  • Microsoft says a successful sign-in does not necessarily mean data was accessed or stolen.
  • China's embassy in Washington rejected the allegations, Reuters reported.

Microsoft said on 21 October 2026 that a China-state aligned threat actor it tracks as Storm-0940 used AI agents to run a large hacking campaign, and assesses that the group was responsible for the recent ConnectWise Cloud Backup supply chain compromise.

What did Microsoft find? #

Since early September 2026, Storm-0940 has used ARTEX, an open-source penetration testing framework that can use any AI model, to automate attacks against hundreds of organizations, Microsoft says. ARTEX runs multiple AI agents that carry out tests from reconnaissance through to data exfiltration with little human involvement.

Measure Figure reported by Microsoft
Tenants targeted More than 2,250
Peak sign-in rate Up to 2,900 attempts per minute
Password spray, 10 to 14 October 327 accounts at eight organizations
Failed logons in that spray More than 151,000
Fastest route to privileged cloud access Under three hours in some attacks

Microsoft says the password spray campaign itself produced no successful authentication, and that most attempts overall failed. It also stresses that an affected application or a successful sign-in does not necessarily mean customer data was accessed or stolen.

Targeted sectors included aerospace and defense, energy, financial services, government, legal, manufacturing, semiconductors, software and technology.

How does this connect to ConnectWise? #

Microsoft says the actor gained control of the identities of several ConnectWise cloud applications and used their existing trust inside customer Microsoft 365 tenants to sign in without any user. In some environments, it then moved on to directory reconnaissance, added credentials to applications for persistence, and changed identities, groups and privileged roles.

Microsoft's report does not explain how the ConnectWise application credentials were stolen. It says the activity did not result from a compromise of, or a vulnerability in, Microsoft's own systems.

ConnectWise CEO Manny Rivelo said the company's assessment indicated that "a China state-aligned group was responsible", Reuters reported. ConnectWise said it had contained the affected application connections and was restoring services in controlled phases, but that this does not remove access already established in customer environments. A spokesperson for China's embassy in Washington rejected the allegations, according to Reuters.

Are other attackers using ARTEX? #

Yes. Microsoft says it has seen threat actors in multiple regions using ARTEX, and cites public reporting of its use in data breaches at Korean financial institutions. Microsoft executive Igor Tsyganskiy wrote that "since early October, a wave of AI-driven cyberattacks has been ongoing," CyberScoop reported.

What should Microsoft 365 admins do? #

  1. Keep ConnectWise application connections disabled until ConnectWise provides restoration instructions, and do not delete the enterprise applications first.
  2. Preserve configurations and logs before making irreversible changes.
  3. Review service principal sign-ins from at least 15 October 2026, and back to 1 October where logs allow, including activity from 144.172.64[.]128, 144.172.64[.]99 and 144.172.64[.]60.
  4. Check Entra and Microsoft 365 audit logs for new application credentials, consent grants, privileged role changes, Conditional Access changes, forwarding rules and unusual mail or file access.
  5. Once unauthorized changes are confirmed, remove them, revoke unnecessary permissions and rotate credentials.
  6. Apply least privilege to multi-tenant application permissions and monitor app-only activity going forward.

Sources

  1. Microsoft: AI-driven nation-state campaign using ARTEX, Microsoft
  2. Microsoft pins ConnectWise attack on Storm-0940, CyberScoop
  3. Chinese-linked hackers use AI to compromise firms globally, Business Standard (Reuters)

Questions this raises

What is ARTEX?
An open-source penetration testing framework that uses AI agents, with any AI model, to automate attacks from reconnaissance to data exfiltration.
Was Microsoft hacked?
No. Microsoft says the activity did not result from a compromise of, or vulnerability in, its own systems, products or services.
Is ConnectWise Cloud Backup back online?
ConnectWise said it was restoring services in controlled phases and advised customers to keep connections disabled until instructed.

AI SecurityAI AgentsSupply Chain SecurityCloud SecurityMicrosoftMicrosoft 365ConnectWiseThreat IntelligenceCyber Espionage