Microsoft Expects $1.5 Billion Loss from OpenAI

During Microsoft’s Q1 2025  earnings call, CFO Amy Hood disclosed an anticipated $1.5 billion loss under “other income and expense” for the coming quarters, driven largely by the company’s stake in OpenAI. This forecasted loss stems from Microsoft’s share of OpenAI’s expected performance, accounted for under the equity method.

“We do not recognize mark-to-market gains or losses on equity method investments,” Hood  said, clarifying the nature of the expected loss.

Meanwhile, Microsoft CEO Satya Nadella said that the partnership is ‘beneficial’ for both Microsoft and OpenAI. “We effectively sponsored what is one of the most highest-valued private companies today when we invested in them and really took a bet on them and their innovation 4, 5 years ago,” said Nadella. 

He added that this quarter, the company integrated support for OpenAI’s newest model family, o1. “Microsoft is also introducing industry-specific models through Azure AI, including a suite of top-tier multimodal models for medical imaging,” he said.

He further said that OpenAI continues to deliver results for Microsoft. “We have an economic interest in a company that has grown significantly in value, and we have built differentiated IP and are driving revenue momentum,” he said.

Nadella also highlighted Azure AI’s expanding AI infrastructure, including the Maia 100 accelerator and NVIDIA’s Blackwell-powered systems, making Microsoft the first cloud provider to support this advanced setup.

Microsoft x OpenAI 

OpenAI recently raised $6.6 billion at a valuation of $157 billion. This time, however, the startup is not solely dependent on Microsoft, as the funding was led by Thrive Capital. Other significant participants in the funding round included NVIDIA, SoftBank, Khosla Ventures, Altimeter Capital, Fidelity, and MGX.

Despite projected 2024 revenues of $3.7 billion, OpenAI anticipates a $5 billion loss due to substantial hardware, electricity, and cloud service expenses.

The company’s forecasts indicate it won’t achieve profitability until 2029, with projected revenue reaching $100 billion. However, losses could escalate to $14 billion in 2026, nearly three times this year’s anticipated losses, according to a recent report. 

Moreover, OpenAI anticipates a steep rise in computing costs for model training over the coming years, with expenses potentially reaching $9.5 billion annually by 2026. 

Microsoft’s partnership with OpenAI began in 2019 with an initial investment of $1 billion.  In the Netflix series What’s Next? Microsoft founder Bill Gates revealed that he initially thought his next big focus would be eradicating malaria, and not AI. However, when Greg Brockman gave him a demo of GPT-4, it completely ‘blew his mind’, changing his perspective on AI.