Microsoft's AI Business Booms on Back of OpenAI Partnership

Microsoft's AI business has been touted as a triumph, with its shares jumping after earnings last week. However, a new filing reveals that most of this growth comes from a single partner: OpenAI.

According to Bloomberg, Microsoft booked $24.1 billion in revenue from OpenAI during the year ending June 30. This is roughly two-thirds of the company's total AI business, which is estimated to be around $34 billion for the year.

The money isn't just a straightforward sale, though. Under their agreement, OpenAI pays Microsoft for cloud computing and model-building costs, as well as a share of its revenue. Much of the $24.1 billion is actually OpenAI's own compute bill routed through Azure and booked as Microsoft income.

When looking at Microsoft's total revenue, OpenAI shrinks to under 10%, closer to 7%. However, when focusing on the AI unit alone, OpenAI's dominance becomes more apparent.

Even internal tools run on OpenAI models. Jay Parikh, who runs Microsoft's CoreAI engineering group, recently told staff to default to OpenAI's flagship GPT-5.6 Sol in GitHub Copilot due to cost savings. This move is part of a wider effort to squeeze more value from Microsoft's token investment in OpenAI.

Microsoft has built its own AI models and offers cloud customers over 11,000 of them, but despite this diversification, roughly 70% of the company's AI revenue still comes from OpenAI. The bears argue that much of this revenue is actually OpenAI's compute bill disguised as growth, leaving Microsoft vulnerable if OpenAI were to stumble.