Microsoft starts talking about OpenAI, but disclosures still fall far short of complete
Microsoft recently said a lot more about its investment in OpenAI but, despite news of arguably material and growing losses, the disclosures still leave a lot to be desired.
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On October 28, 2025, Microsoft (Ticker: MSFT) for the first time disclosed meaningful details regarding the value of its investment in OpenAI. Microsoft also noted in an 8-K filing and its blog announcement that its investment to date was valued at approximately $135 billion:
First, Microsoft supports the OpenAI board moving forward with formation of a public benefit corporation (PBC) and recapitalization. Following the recapitalization, Microsoft holds an investment in OpenAI Group PBC valued at approximately $135 billion, representing roughly 27 percent on an as-converted diluted basis, inclusive of all owners – employees, investors, and the OpenAI Foundation.
Excluding the impact of OpenAI’s recent funding rounds, Microsoft held a 32.5 percent stake on an as-converted basis in the OpenAI for-profit.
This is the first time Microsoft disclosed its percentage stake at OpenAI (27% on an as-converted basis) and Microsoft also makes a distinction between its commitment to fund the investment ($13 billion) and the actual funding of its investment to date ($11.6 billion).
According to Microsoft’s 10-Q filed October 30, 2025:
We have an investment in OpenAI Global, LLC (“OpenAI”) and have made total funding commitments of $13 billion, of which $11.6 billion has been funded as of September 30, 2025. The investment is accounted for under the equity method of accounting, with our share of OpenAI’s income or loss recognized in other income (expense), net.
So, let’s be clear: as of today, a $135 billion fair value estimate represents more than a 10X valuation of the $11.6 billion funding, as opposed to the $13 billion commitment. The distinction between commitment and funding is important: while the former gives an estimate of the total of the expected investment in the partnership, the latter shows how much has actually been invested to date. The funding – not the commitment – is the number reflected in the Microsoft’s financial statements. Moreover, the distinction is even more important if the investment has been staggered – that is, if Microsoft has invested in OpenAI in increments over the years rather than all $11.6 billion at once.
Under the revised 2025 partnership terms Microsoft refers to in its filing on October 28, Microsoft and OpenAI restructured their agreement to clarify ownership, IP rights, and commercialization paths leading up to and after the declaration of Artificial General Intelligence or AGI, such as:
An independent expert panel will now verify any AGI declaration.
Microsoft’s IP rights for models and products extend through 2032 and cover post-AGI systems with safety guardrails, while its rights to OpenAI’s confidential research methods last until AGI verification or 2030.
Microsoft’s IP no longer covers OpenAI’s consumer hardware, and OpenAI can jointly develop some products with third parties. Co-developed API products remain Azure-exclusive, while non-API ones may run on any cloud.
Microsoft can independently pursue AGI projects. OpenAI — a customer of Microsoft— committed to an additional $250 billion in Microsoft Azure purchases, though Microsoft lost its right of first refusal to be OpenAI’s compute provider.
Microsoft refers to a “revenue-sharing” arrangement and says that this revenue-sharing arrangement continues until AGI is verified but will be spread over a longer period of time. Microsoft does not explain anywhere what the substance or form of this “revenue-sharing” arrangement is.
OpenAI may now offer API access to U.S. national security clients running on any cloud.
OpenAI may release open-weight models that meet certain capability standards.
Overall, the re-negotiated agreement appears to grant OpenAI more flexibility in selecting cloud providers and development partners, shifting the focus of the agreement toward more monetary commitments and less control over OpenAI’s partnerships with third parties.
To the best of our knowledge, the October 28, 2025, Microsoft’s blog was the first time that Microsoft – vs. media – mentioned a revenue-sharing agreement in an SEC filing or a public statement.
Update: A reader brought to our attention that Microsoft did mention its “reciprocal revenue sharing arrangements” with OpenAI in its fiscal 2025 10-K as of July 30, 2025.
Microsoft and OpenAI maintain a long-term strategic partnership originally established in 2019. Microsoft is a major investor in OpenAI, and the companies have reciprocal revenue-sharing arrangements. We hold rights to OpenAI’s intellectual property, including models and infrastructure, for integration into our products. The OpenAI API is exclusive to Azure, runs on Azure, and is available through the Azure OpenAI Service. We also have a right of first refusal on OpenAI’s new capacity needs.
Microsoft repeats similar language in the September 230, 2025 10-Q. But when describing the impact of the “new definitive agreement” in its October 28, 2025 8-K and blog post, Microsoft refers to a “revenue share agreement” with OpenAI. Is the new terminology legally significant? We do not know for certain.
Francine and I have wondered more than once about why Microsoft has been so tight lipped regarding its relationship with OpenAI. Now we wonder about its still very selective disclosure that, again, raises more questions than it answers.
Let’s look, after the paywall, at the history of Microsoft’s disclosures.