Microsoft Chairman and CEO Satya Nadella (left) speaks with OpenAI CEO Sam Altman, who joined by video, during the Microsoft Build 2025 conference on May 19, 2025 in Seattle, Washington.
Jason Redmond | AFP | Getty Images
microsoft Net income took a $3.1 billion hit in the first quarter due to the software company’s heavy investment in OpenAI.
Microsoft said in its earnings report Wednesday that the decrease in earnings reflected “equity method investments,” resulting in a 41 cent decrease in earnings per share. Net income was $27.7 billion, or $3.72 per share, still up from $24.67 billion, or $3.30 per share, in the year-ago period.
Since first backing OpenAI in 2019, Microsoft has committed to investing $13 billion in the company, with $11.6 billion already raised as of the end of September, according to the filing.
The announcement comes a day after OpenAI announced it had completed a recapitalization and strengthened its position as a nonprofit organization with control of its for-profit businesses. The nonprofit, now called the OpenAI Foundation, has about $130 billion worth of equity in the for-profit sector.
Under the new structure, the OpenAI Foundation will own 26% of the commercial company’s stock, and current and former employees and investors will own 47%.
Microsoft currently has an investment worth $135 billion in the public benefit corporation, representing approximately 27% of the company on a diluted basis.
Microsoft said that under the deal, “OpenAI has agreed to purchase an additional $250 billion in Azure services,” and that Microsoft will no longer have priority rights as the computing provider.
On Wednesday’s earnings call, Microsoft CEO Satya Nadella called the relationship “one of the most successful partnerships and investments our industry has ever seen,” adding, “We will continue to mutually benefit from our mutual growth on multiple fronts.”
Microsoft and OpenAI have been partners for more than five years, long before the launch of ChatGPT in late 2022, and the two companies are increasingly competing in different areas of the AI market.
Over a year ago, Microsoft added OpenAI to its list of competitors in its most recent annual report. That list includes Amazon, Apple, Google, and giant corporate peers. Meta.
In the filing, Microsoft identified OpenAI, creator of the ChatGPT chatbot, as a competitor in AI products and search and news advertising. Ahead of its launch, OpenAI announced a prototype search engine called SearchGPT.
Microsoft has relied heavily on OpenAI’s models to power the AI capabilities of its core products. However, Microsoft announced in August that it had begun public testing of an AI model it developed that could lead to enhancements to its Copilot assistant for consumers.
Microsoft reported better-than-expected revenue and profit on Wednesday. Its big growth driver remains the Azure cloud, with revenue expanding 40% and exceeding expectations.
Spotlight: OpenAI clears restructuring hurdle
