OpenAI is projected to significantly reduce the percentage of revenue it shares with its key commercial partner, Microsoft, according to a report from The Information. The company plans to decrease Microsoft’s share from the current 20% to approximately 8% by the end of the decade. This substantial shift in financial terms is estimated to allow OpenAI to retain over $50 billion in additional revenue that would have otherwise gone to its partner, though it was not specified if this figure is cumulative or annual.
The new financial arrangement is part of a broader restructuring of the relationship between the two tech giants. The companies announced on Thursday that they had signed a non-binding agreement allowing OpenAI to transition into a for-profit company. This move would fundamentally change its corporate structure and its financial obligations to its primary investor and cloud computing provider, Microsoft.
Parallel to the revenue-sharing negotiations, the two firms are also discussing the terms for OpenAI’s use of Microsoft’s Azure servers. These talks are critical as server rental costs represent a major expense for the AI lab. The outcome will significantly impact the operational costs and profitability of the newly structured for-profit entity.
Despite the shift to a for-profit model, OpenAI’s original nonprofit arm is slated to remain a major beneficiary. According to a memo from Bret Taylor, chairman of OpenAI’s nonprofit board, the arm is expected to receive more than $100 billion under the current terms. This sum, based on a sought-after $500 billion private market valuation, would cement it as one of the world’s most well-funded nonprofit operations.
