I saw it as Microsoft's signalling that they care more about being in the good graces of the wider developer community than about dominating the programming editor/IDE market. After all VSCode is free. I'd argue that giving away VSCode, LSP, Monaco (the base editor) and so on has been a successful means of redeeming their brand in the eyes of developers and really anyone who ever touches code. That could backfire if they took on an aggressively competitive stance. Letting LSP play nicely with other editors seems therefore good business for them. It also appears that as a profitable business, money Microsoft spends on VSCode might otherwise be spent as taxes?