Microsoft will not be able to earn more than $38 billion from its partnership with OpenAI

Microsoft and OpenAI: new terms of cooperation

The Microsoft Corporation is the oldest strategic investor in OpenAI; since 2019 it has gradually invested at least $13 billion in the startup. However, the latest restructuring of OpenAI changed the nature of their relationship.

What Changed
* Revenue cap for Microsoft

Until now Microsoft could count on 20 % of OpenAI’s total revenue without an upper limit, which theoretically would have given the company up to $135 billion. In the new agreement the limit is set at $38 million, thereby saving $97 billion for the startup’s needs.

* Impact on future payments

Microsoft will receive its share of revenue only until the total amount exceeds $38 billion. After that, payments will cease. If the limit is not reached by 2030, payments will end anyway. This year it is expected that the company will receive about $6 billion.

* Increased financial independence for OpenAI

The limited cash inflow gives the startup greater freedom in preparing for an IPO planned for the end of the year.

New Opportunities for Partners
OpenAI can now freely seek other investors and strategic partners. Among them are Google and Amazon Web Services (AWS), competitors of Microsoft. After the restructuring, Microsoft holds about 27 % of OpenAI’s shares.

Public Acknowledgements
Microsoft CEO Satya Nadella confirmed in court that the company originally expected financial gain from its investment in OpenAI, not just humanitarian goals. Under the plan, Microsoft anticipated earning $92 billion, which far exceeds the new limit of $38 billion, but the giant still has the option to sell its shares for additional profit.

Thus, the new structure of the agreement gives OpenAI more autonomy and opens the path to an IPO, while Microsoft retains a significant, though limited, interest in the startup’s success.