You are making an assumption that this is a tit-for-tat arrangement.
Smart business moves are rarely this.
To say that if they give up money here, they HAVE to make it up there is not necessarily true.
We don't know exactly what MS's end game is, but this could just be a strategic move in a much larger game.
The fact is, MS's major money makers right now are Azure (which is giving AWS a huge run for its money) and Office 365. They may be willing to take a loss in what was once a major money maker so that they can push other services (like O365).
MS is not a one trick pony, they don't need to sell your information to advertisers to make a buck so it seems unlikely that is what they are doing. I think it is more likely that what they are doing is leveraging their cloud platform to improve the overall experience of Windows.
Believe it or not, cloud computing is here to stay, it only makes sense that a Microsoft, a company that operates the #2 cloud platform, will take advantage of that platform and, gasp, make a lot of network connections to do it.
You are completely within your right to not use this operating system. There are a lot more players in this arena than there used to be, however, if you look at any of them, they are all doing basically the same thing (leveraging cloud computing to enhance the customer experience).
One of the "value added" (to Microsoft or Google or Amazon or Apple) of sending information to the cloud is they also get invaluable information on how their products are being used. Like it or not, this is the way we are headed.
This kind of thing definitely is scary but it is not going away... as a matter of fact, I think that a lot of people find that the more their company of choice knows about them the more they like it because it becomes a more personalized experience.