OpenAI renegotiates Microsoft partnership with $38bn revenue sharing cap

OpenAI has renegotiated the financial terms of its multibillion-dollar partnership with Microsoft, capping the software giant’s share of OpenAI revenue at $38 billion through 2030 in a move that could save the ChatGPT maker about $97 billion over the next several years.

According to a report by The Information, the revised agreement significantly reduces Microsoft’s long-term revenue entitlement from OpenAI while preserving the companies’ strategic alliance.

Under the original deal, Microsoft was entitled to receive 20% of OpenAI’s revenue through 2030. If OpenAI achieved its projected growth trajectory, those payments could have totalled roughly $135 billion by the end of the decade.

The renegotiated terms now place a ceiling of $38 billion on Microsoft’s revenue-sharing payout, effectively allowing OpenAI to retain an additional $97 billion.

Reuters reported that the new arrangement gives OpenAI greater financial flexibility as the company prepares for a possible initial public offering and seeks to diversify its cloud infrastructure partnerships beyond Microsoft Azure.

The agreement is also expected to allow OpenAI to work more extensively with rival cloud providers including Amazon and Google, reducing its dependence on Microsoft infrastructure.

In exchange, Microsoft secured several long-term concessions from OpenAI, including continued revenue-sharing payments through 2030, guaranteed access to OpenAI technology through 2032, and clearer contractual protections tied to the companies’ relationship regardless of whether OpenAI successfully develops artificial general intelligence (AGI).

The report noted, however, that the revised structure could increase OpenAI’s short-term cash burn because the company will no longer be able to defer some financial obligations to Microsoft into future years.

OpenAI is expected to continue spending aggressively on AI model development, data centres, chips and global computing infrastructure as competition intensifies across the artificial intelligence sector.

The renegotiation marks the latest evolution in one of the technology industry’s most influential partnerships. Microsoft first invested $1 billion in OpenAI in 2019 before deepening the alliance with additional investments reportedly worth more than $13 billion.

The partnership gave Microsoft privileged access to OpenAI’s models, helping integrate generative AI features across products including Windows, GitHub and Office.

The revised agreement also comes at a sensitive moment for OpenAI as the company faces mounting legal and governance scrutiny. Elon Musk, one of OpenAI’s co-founders, is currently pursuing legal action against OpenAI and chief executive Sam Altman, alleging that the company abandoned its original nonprofit mission by prioritising commercial interests and partnerships with Microsoft.

Musk’s lawsuit argues that OpenAI’s transition toward a profit-driven structure violates the organisation’s founding principles. OpenAI has denied the allegations, describing the claims as unfounded and accusing Musk of attempting to slow a competitor while advancing his own AI venture, xAI.