Microsoft quietly made $7.6 billion from OpenAI as AI revenues surge

Microsoft

• Microsoft net income jumped $7.6B, driven by OpenAI and Anthropic investments
• OpenAI to buy $250B in Azure services, boosting Microsoft's future revenue
• Microsoft Cloud revenue topped $50B, with overall revenue up 17% year-on-year

Did our AI summary help?

Microsoft revealed during its latest quarterly earnings on Wednesday that its net income jumped by $7.6 billion, largely driven by its investment in OpenAI. While the relationship between the two companies has often been described as complicated, the numbers suggest that, financially at least, Microsoft is winning big.

Although neither company has publicly confirmed the details, OpenAI is widely reported to share around 20% of its revenue with Microsoft. The software giant has poured more than $13 billion into the AI lab so far, and that bet is now looking increasingly prescient. According to Bloomberg, OpenAI is currently in talks to raise fresh funding at a staggering valuation of $750 billion to $830 billion, a figure that would place it among the most valuable private companies in the world.

The partnership was recalibrated in September after OpenAI restructured itself as a public benefit corporation. One of the most significant outcomes of that renegotiation was OpenAI’s commitment to purchase an additional $250 billion worth of Azure cloud services. That promise appears on Microsoft’s balance sheet as “commercial remaining performance obligations”, essentially revenue that has been contracted but not yet realised.

Those obligations surged to $625 billion, up sharply from $392 billion in the previous quarter. Microsoft disclosed that 45% of this figure is tied to OpenAI, offering a rare glimpse into the sheer scale of the AI lab’s dependence on Azure infrastructure.

Anthropic investment pays off

Anthropic also featured in Microsoft’s earnings narrative. Commercial bookings rose 230%, helped in part by Microsoft’s growing relationship with the rival AI company. In November, Microsoft announced a $5 billion investment in Anthropic, alongside a deal for $30 billion in Azure compute capacity, with more expected down the line.

None of this comes cheap. Microsoft spent $37.5 billion on capital expenditures during the quarter, with roughly two-thirds going towards short-lived assets such as GPUs and CPUs needed to power AI workloads on Azure. The company is spending aggressively to stay ahead in the AI arms race.

Overall, Microsoft posted $81.3 billion in revenue, beating Wall Street expectations of $80.27 billion and marking a 17% year-on-year increase. Microsoft Cloud revenue crossed $50 billion in a single quarter for the first time. Nearly every business unit grew at double-digit rates, with the exceptions being Windows devices, which remained flat, and Xbox content and services, which declined 5%.