Microsoft CFO says OpenAI investment will cut into profit this quarter

Microsoft CFO says OpenAI investment will cut into profit this quarter


Microsoft CEO Satya Nadella, right, speaks as OpenAI CEO Sam Altman looks on during the OpenAI DevDay event in San Francisco on Nov. 6, 2023.

Justin Sullivan | Getty Images

Microsoft‘s massive investment in OpenAI is weighing on earnings.

Following Microsoft’s quarterly earnings report on Wednesday, CFO Amy Hood said she expects the company to take a $1.5 billion hit to income in the current period, mainly because of an expected loss from OpenAI.

Microsoft has invested close to $14 billion in OpenAI, whose ChatGPT assistant has gone viral and inspired a whole new industry called generative artificial intelligence. The trend has generated billions of dollars in new revenue for Microsoft.

But OpenAI is losing bundles of cash. The company expects $5 billion in losses this year, before stock-based compensation, on $4 billion in revenue, The Information reported earlier this month, citing documents.

Hood said that for Microsoft, the loss is accounted for under the equity method. The accounting approach refers to a company’s share of the invested company’s profit or loss in a given period, a Microsoft spokesperson said.

The additional detail is “not due to a change in our partnership or investment in OpenAI,” the spokesperson said in an email. “Our partnership with OpenAI continues to deliver results, as we build differentiated IP and drive revenue momentum.”

The earnings call came after Microsoft reported an earnings and revenue beat for the fiscal first quarter. However, the stock slid in extended trading after the company’s forecast called for slower-than-expected growth.

While OpenAI is a central part of Microsoft’s growth strategy, the company has been hedging its bets after integrating OpenAI’s models into several products and acting as the startup’s exclusive cloud infrastructure provider. On Tuesday, Microsoft’s GitHub subsidiary said it would allow developers to power the Copilot Chat feature with models from Google or startup Anthropic instead of OpenAI’s GPT-4o.

In addition to the $13 billion Microsoft had invested in OpenAI as of Sept. 30, the company put in another $750 million in a funding round announced in October, which valued OpenAI at $157 billion.

Microsoft rivals are playing a similar game. Amazon, most notably, has invested $4 billion in AI model company Anthropic, whose founders previously worked at OpenAI. Amazon reports earnings on Thursday.

The OpenAI investment disclosure was new for Microsoft, but the company has registered over $2.3 billion in other expense in the past four quarters. That number has factored in the investment in OpenAI, the spokesperson said.

On the earnings call, Microsoft CEO Satya Nadella said the collaboration with OpenAI has benefited both parties and that the company feels good about “our investment stake in OpenAI.”

OpenAI didn’t immediately respond to a request for comment.

WATCH: Oppenheimer downgrades Microsoft: OpenAI losses are not properly priced in

Oppenheimer downgrades Microsoft: OpenAI losses are not properly priced in



Source

Musk, X to face trial in Don Lemon lawsuit alleging breach of contract
Technology

Musk, X to face trial in Don Lemon lawsuit alleging breach of contract

Elon Musk (L) & Don Lemon Reuters (L) | Getty Images (R) Ex-CNN anchor Don Lemon’s lawsuit against tech billionaire Elon Musk and his social network X over the cancellation of their partnership can proceed to trial, a San Francisco judge ruled this week. Musk’s team had tried to get the case moved to a […]

Read More
Bitcoin sets another record above 3,000 as investors jump into risk assets, liquidate shorts
Technology

Bitcoin sets another record above $113,000 as investors jump into risk assets, liquidate shorts

Bitcoin climbed to new all-time high on Thursday, building on its previous record reached just a day earlier, as investors jumped into risk assets and liquidated short positions. The price of the flagship cryptocurrency was last higher by more than 2% at $113,766.74. Earlier, it rose as high as $113,863.18. Over the past 24 hours, […]

Read More
Microsoft Outlook hit with hours-long outage
Technology

Microsoft Outlook hit with hours-long outage

Omar Marques | Lightrocket | Getty Images Microsoft‘s Outlook email service malfunctioned for several hours Wednesday and Thursday, prompting some people to post on social media about the inability to reach their virtual mailboxes. The issue began at 6:20 p.m. Eastern time on Wednesday, according to a dashboard the software company maintains. It affected Outlook.com as well […]

Read More