OpenAI-Microsoft Deal Gets $38 Bn Revenue Cap Amid IPO Talks

OpenAI and Microsoft have agreed to cap total revenue-sharing payments between the two companies at $38 billion, according to a report by The Information, citing a person familiar with the arrangement. The move is expected to strengthen OpenAI’s long-term appeal to investors as the company explores a possible public offering, which some executives reportedly believe could happen as early as the end of this year.

The revised agreement follows contract renegotiations between the two firms last month, creating room for OpenAI to build partnerships with other major technology companies, including Amazon and Google.

In a blog post published on April 27, Microsoft said the amended agreement was designed to “simplify” the partnership while improving flexibility and predictability for both companies as they expand their artificial intelligence ambitions.

Microsoft Keeps Strong Position

Under the revised terms, Microsoft will remain OpenAI’s primary cloud partner, with OpenAI products continuing to launch first on Azure unless Microsoft can not support the required capabilities. At the same time, OpenAI will now be able to offer products through other cloud providers as well.

Microsoft will continue to hold a non-exclusive license to OpenAI’s intellectual property through 2032. The company will no longer pay a revenue share to OpenAI, though OpenAI’s revenue-sharing payments to Microsoft will continue through 2030 at the same percentage rate, subject to the newly agreed cap. Microsoft also remains a major shareholder in OpenAI.

Musk Lawsuit Adds Pressure

The evolving partnership comes as Microsoft CEO Satya Nadella testified on Monday in Elon Musk’s lawsuit against OpenAI in Oakland, California. Musk alleges that OpenAI abandoned its original nonprofit mission and shifted toward a for-profit structure that benefited private investors and Microsoft.

Nadella defended Microsoft’s investment, saying the company “took the risk” early and helped build “one of the largest, most well-funded nonprofits in the world.” Reports said Microsoft’s stake in OpenAI is currently valued at about $135 billion, while OpenAI’s valuation has surged to around $852 billion as of March.