OpenAI to Gain $50 Billion From Cutting Revenue Share with Microsoft, Partners
The Takeaway
- OpenAI plans to share 8% of its revenue with Microsoft, partners by decade’s end
- Forecast contrasts with existing revenue sharing agreement
- Microsoft will own about one-third of OpenAI’s restructured company and not take a board seat
As OpenAI irons out new terms of a partnership with Microsoft, it has told some shareholders that the percentage of revenue it will hand over to Microsoft will drop considerably in the coming years.
As part of their original partnership agreement, Microsoft is entitled to 20% of the startup’s revenue through 2030. But OpenAI has projected to share roughly 8% of its revenue with commercial partners—namely, Microsoft—by the end of the decade from just under 20% this year. The difference between those figures adds up to over $50 billion in additional revenue OpenAI would keep for itself through 2030, which it needs because it has projected record-breaking expenses for computing power before that year.
The companies are also negotiating what will happen when OpenAI achieves so-called artificial general intelligence, or AI that’s as intelligent as a human. The companies’ existing contract stipulates that Microsoft will lose exclusive access to OpenAI’s technology once the startup demonstrates that its technology can surpass certain financial milestones, but Microsoft has been angling for the AGI clause to be modified or removed from the contract.
The two companies are also negotiating how much OpenAI will spend to rent servers from Microsoft, according to another person briefed on the discussions.
While many aspects of the deal are still up in the air, some aspects of the agreement have been largely worked out, say people close to the discussions. Namely, OpenAI’s nonprofit and Microsoft will each get around one-third of the new company, which is currently allowing its employees to sell shares at a $500 billion valuation, one of the people said.
For the last several weeks, teams from both sides, including OpenAI Chief Financial Officer Sarah Friar and Microsoft Chief Financial Officer Amy Hood, and or people who report to them have been meeting weekly to work out the details of the restructuring, according to the person.
It’s not clear why OpenAI is projecting sharing less than 20% of its revenue with Microsoft, given the earlier terms, but some OpenAI leaders want Microsoft to exempt future OpenAI products that haven’t been released yet from the existing revenue-sharing agreement, such as PhD-level agents that cost $20,000 a month.
The 8% figure is even lower than OpenAI’s projection from earlier this year, when it expected to share about 10% of its 2030 revenue with partners, down from nearly 30% this year. (The higher percentage for 2025 may reflect OpenAI’s agreement to power some Siri queries on Apple devices, which doesn’t appear to have contributed much to the startup’s subscription sales, of which Apple would get a cut.)
The change means OpenAI plans to share nearly $56 billion in revenue with Microsoft and other partners through 2030, compared to the roughly $74 billion it had previously projected. It’s not clear whether a new, non-binding agreement Microsoft and OpenAI said on Thursday they had signed for their partnership includes changes to the latest revenue-sharing plan shared with some investors.
