The relationship between Microsoft and OpenAI is notoriously rocky, but Microsoft, one of its major investors, has benefited greatly from OpenAI’s unprecedented revenue growth.
The software giant reported this sizable item when it reported its latest quarterly results on Wednesday. The investment in OpenAI increased net income by $7.6 billion.
OpenAI reportedly has a 20% revenue-sharing agreement with Microsoft (though neither company has ever publicly confirmed it). The software giant has invested more than $13 billion in its AI research lab and is currently considering raising additional funding at a valuation of $750 billion to $830 billion, Bloomberg reports.
In September, Microsoft and OpenAI renegotiated some of the terms of the agreement as OpenAI reorganized into a public benefit corporation.
As part of the deal, OpenAI agreed to purchase an additional $250 billion in Azure services. This commitment is listed on Microsoft’s books as a “remaining commercial performance obligation,” or a contract Microsoft has that has not yet been paid. Those debts jumped to $625 billion from $392 billion in the previous quarter. Microsoft says 45% of that is due to OpenAI.
Anthropic was also praised in the quarterly results for helping boost Microsoft’s expected future revenue in the form of a 230% increase in commercial bookings. In November, Microsoft announced that it had invested $5 billion in Anthropic and that AI Labs had signed up for $30 billion in Azure computing capacity, with plans to purchase more over time.
But Microsoft is also spending a lot of money to feed its AI machines. Microsoft spent $37.5 billion in capital expenditures in the quarter, two-thirds of which were what Microsoft calls “short-lived” assets, primarily GPUs and CPUs in its Azure cloud that services AI.
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The company reported revenue of $81.3 billion (Wall Street analysts were expecting $80.27 billion, so that’s a solid number), up 17% year-over-year. This quarter, the company’s Microsoft Cloud revenue reached $50 billion for the first time. All of Microsoft’s business units grew by double-digit percentages compared to the same period last year, except for Windows devices, which increased by 1% (nearly flat) and Xbox content and services, which decreased by 5%.
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