Microsoft CEO Satya Nadella (right) speaks as OpenAI CEO Sam Altman looks on at the OpenAI DevDay event in San Francisco on November 6, 2023.
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MicrosoftThe huge investment in OpenAI is affecting profits.
Follow Microsoft’s quarterly earnings report On Wednesday, Chief Financial Officer Amy Hood said she expects the company’s revenue to fall by $1.5 billion in the current period, mainly due to expected losses from OpenAI.
Microsoft has invested nearly $14 billion in OpenAI, and its ChatGPT assistant has quickly become popular and inspired a new industry called “generative artificial intelligence.” This trend has generated billions of dollars in new revenue for Microsoft.
But OpenAI is losing a lot of cash. The company expects a loss before stock compensation of $5 billion this year on revenue of $4 billion. information citing documents reported earlier this month.
Hood said that for Microsoft, losses are accounted for under the equity method. A Microsoft spokesman said the accounting method refers to a company’s share of the profits or losses of an investee company during a specific period.
The additional details “are not due to a change in our partnership or investment in OpenAI,” a spokesperson said in an email. “Our partnership with OpenAI continues to bear fruit as we build differentiated IP and drive revenue growth.”
The earnings call came after Microsoft reported better-than-expected fiscal first-quarter profits and revenue. However, the stock fell in after-hours trading after the company forecast lower-than-expected growth.
While OpenAI is a core part of Microsoft’s growth strategy, the company has been hedging its bets after integrating OpenAI’s model into multiple products and serving as the startup’s exclusive cloud infrastructure provider. On Tuesday, Microsoft’s GitHub unit said it will allow developers to provide support for the platform Co-pilot chat function model from Google Or start Anthropic instead of OpenAI’s GPT-4o.
Microsoft has invested $13 billion in OpenAI as of September 30, and the company has invested another $750 million in a funding round Announced in Octobervaluing OpenAI at $157 billion.
Microsoft’s rivals are playing a similar game. Amazonmost notably, has invested in $4 billion Works at AI model company Anthropic, whose founder previously worked at OpenAI. Amazon reports earnings on Thursday.
The OpenAI investment revelation is new for Microsoft, but the company has made more than $2.3 billion in other spending over the past four quarters. The spokesperson said this figure already includes the investment in OpenAI.
Microsoft CEO on earnings call Satya Nadella Said that cooperation with OpenAI has benefited both parties, and the company feels good about “our investment stake in OpenAI.”
OpenAI did not immediately respond to a request for comment.
watch: Oppenheimer downgrades Microsoft: OpenAI losses not properly accounted for
