Microsoft did port some versions of Windows to Itanium, so they did not reject it at first.
With poor market demand and AMD's success with amd64, Microsoft did not support itanium in vista and later desktop versions which signaled the end of Intel's Itanium.
Microsoft also ships/shipped a commercial compiler with tons of users, and so they were probably in a position to realize early that the hypothetical "sufficiently smart compiler" which Itanium needed to reach its potential wasn't actually possible.
With poor market demand and AMD's success with amd64, Microsoft did not support itanium in vista and later desktop versions which signaled the end of Intel's Itanium.