Microsoft has just revealed its earnings report for the last quarter and announced that the net income rose by $7.6 billion, largely due to gains linked to its investment in OpenAI. Microsoft has invested more than $13 billion in OpenAI, and the AI company is reportedly in talks to raise additional capital at a valuation of $750 billion to $830 billion, according to recent reports.
It should be noted that the company has not publicly disclosed the commercial structure of its alliance; however, reports suggest OpenAI shares approximately 20% of the revenue with Microsoft. The bond was strengthened when OpenAI became a public benefit corporation, prompting both parties to renegotiate certain terms of their agreement.
One of the key outcomes of the restructuring was OpenAI’s increased commitment to Microsoft’s cloud platform. The AI lab agreed to purchase an additional $250 billion in Azure services, which is now reflected in Microsoft’s books as part of its “commercial remaining performance obligations.” These future contracts increased dramatically to $625 billion from $392 billion in the previous quarter, with Microsoft confirming that OpenAI accounts for approximately 45% of that total.
Microsoft’s earnings also reflected rising demand from other AI players. Anthropic, another major AI lab, was cited as contributing to a 230 percent increase in commercial bookings. Last year, Microsoft invested $5 billion in Anthropic as part of a deal that included $30 billion in Azure compute capacity, with room for further growth.
However, the AI push is proving costly. During the quarter, Microsoft spent $37.5 billion on capital expenditures, with nearly two-thirds going to short-lived assets like GPUs and CPUs to support AI workloads in Azure.
Overall, Microsoft reported quarterly revenue of $81.3 billion, exceeding market expectations and showing a 17 per cent year-over-year increase. Microsoft Cloud revenue surpassed $50 billion for the first time, with most business segments experiencing double-digit growth. Windows devices saw marginal gains, while Xbox content and service revenue fell slightly.