Microsoft Expects $1.5 Billion Loss from OpenAI
During Microsoft’s Q1 2025 earnings call, CFO Amy Hood revealed a forecasted $1.5 billion loss under “other income and expense” for the forthcoming quarters, primarily due to the company’s investment in OpenAI. This anticipated loss arises from Microsoft’s proportion of OpenAI’s projected performance, recorded under the equity method.
Amy Hood clarified, “We do not recognize mark-to-market gains or losses on equity method investments,” explaining the expected loss’s nature.
Meanwhile, Microsoft CEO Satya Nadella expressed that the partnership remains ‘beneficial’ for both Microsoft and OpenAI. Nadella noted, “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.”
He mentioned that this quarter, Microsoft integrated support for OpenAI’s latest model family, o1. “Moreover, Microsoft is introducing industry-specific models through Azure AI, including a suite of top-tier multimodal models for medical imaging,” he added.
Nadella emphasized that OpenAI continues to yield results for Microsoft, asserting, “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.”
Additionally, Nadella highlighted the expanding AI infrastructure in Azure AI, featuring the Maia 100 accelerator and NVIDIA’s Blackwell-powered systems, positioning Microsoft as the first cloud provider to support this advanced setup.
OpenAI recently raised $6.6 billion, placing their valuation at $157 billion. However, unlike previous funding rounds, this initiative was spearheaded by Thrive Capital, reducing OpenAI’s dependence solely on Microsoft. Other prominent participants in this funding round included NVIDIA, SoftBank, Khosla Ventures, Altimeter Capital, Fidelity, and MGX.
Despite predicting 2024 revenues of $3.7 billion, OpenAI expects a $5 billion loss due to significant hardware, electricity, and cloud service costs.
OpenAI’s projections indicate profitability won’t be achieved until 2029, with forecasted revenue surging to $100 billion. Nevertheless, losses could escalate to $14 billion in 2026, nearly three times the anticipated losses for this year, according to recent reports.
Moreover, OpenAI foresees a steep increase in computing costs for model training in the coming years, with expenses potentially reaching $9.5 billion annually by 2026.
Microsoft’s collaboration with OpenAI initiated in 2019, following a $1 billion initial investment. In a revealing glimpse into Microsoft’s perspective on AI’s potential, Bill Gates, in a Netflix series, shared that he initially envisioned his next major focus would be eradicating malaria, not artificial intelligence. However, a demo of GPT-4 by Greg Brockman profoundly changed his perspective, highlighting AI’s transformative potential.
