7 ms·
Microsoft needs to open up more about its OpenAI dealings
- IlikeKitties 1y agoKnowing Microsoft I assume this is due to a sharepoint bug.
- irl_zebra 1y agoThis is from the Annual Report.
- zerosizedweasle 1y agoHow is it already losing that much money on its OpenAI investment?
- smt88 1y agoBecause OpenAI loses far, far more. It may be one of the least profitable companies in history.
- mandeepj 1y agoYou may not be following OA for a while! They’ve never turned a profit. So, someone on the other side has to lose for them to stay afloat!
- mrweasel 1y ago> They’ve never turned a profit Now that OpenAI is starting to talk about ads and allowing "erotic" content, I feel more comfortable in my prediction that not only have OpenAI never turned a profit, they never will. They will be consumed by Microsoft or crash the market so hard it's not even funny. The technology will survive, and it will be useful, but OpenAI as a company is done.
- ed_elliott_asc 1y agoDo you predict the same for Anthropic? Hopefully they will stick around.
- mrweasel 1y agoThe problem, I think, is that IF OpenAI fail, they'll take with them a lot of other AI companies, simply because funding will be redirected away from the field entirely. If you're profitable, then you're probably going to be fine. If anything your operating costs will go down as there is less competition for staff and compute.
- Yizahi 1y agoIf we go purely by economics, then Anthropic belongs to the same category of LLM corporations - ones which have only LLM as a product. As opposed to the likes of Google, Microsoft, even Facebook. Sure, these LLM-first corporations have a very tiny lead in both technology and (LLM) brand recognition, but it is shrinking fast. I suspect that only companies which will bundle LLMs with other big products (and do it cheaply) will survive in the long run.
- alangibson 1y agoThis. If you really think you're a couple of years away from building Digital God, and today have virtually unlimited access to capital, you are not going to spend time shipping a sexy mode.
- thfuran 1y agoWhy not do both if you have unlimited capital today?
- Yossarrian22 1y agoDo they also have infinite labor?
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- Mistletoe 1y agoSurely nothing bad could happen by basing our entire economy and stock market health on these companies!
- A_D_E_P_T 1y agoThey're in a tough place with respect to pricing. Qwen3 and DeepSeek's latest local models are too good and are practically free -- so if they try and jack up pricing to a level that ensures profitability, it won't work, as they're simply going to lose too many customers. There's a mechanism here similar to a Laffer Curve: Charge too much, they lose; charge too little, they lose. OAI needs to strike a delicate balance vs. surging low-cost competition.
- whiplash451 1y agoTo be fair, MSFT is likely making a ton of money (or more likely, preventing churn) with their GPT-powered products for the enterprise. So the math is probably harder than it seems.
- cube00 1y agoNobody really knows, they hide Copilot inside each of the business units and then claim it's too hard to split out.
- tcmart14 1y agoWould be totally a guess since as mentioned, they are not being too forth coming. But chances are, the inclusion of GPT into the products probably did not make those products any more profitable than before, and just make them more expensive to run. Everyone who would buy Sharepoint/dynamics 365 already has it. I doubt they saw a massive influx to the user base of these tools due to GPT. Have you heard of a massive influx of new Windows license being bought because og co-pilot? No, its just the normal churn of people upgrading their machines they were probably gonna upgrade soon anyways. The exception might be Azure with their LLM services.
- JCM9 1y agoOpenAI is a textbook example of having fun by burning cash. Nobody doubts it’s “cool.” Lots of people questioning if there’s an actual business there.
- impossiblefork 1y agoI think it makes Microsoft feel bigger though. If Microsoft were just Windows, Teams, Azure, Bing and whatever it is, Microsoft would actually feel like a competitor for firms like Canonical or Red Hat or SUSE which happens to be big but nothing special relative to the others, whereas it now, with with this very public service feels like a behemoth.
- Insanity 1y agoHuh, that’s a funky statement because having “Azure”, one of the largest Cloud Providers outside of China is definitely a different camp than Canonical, Red Hat and SUSE. Although I don’t particularly like their cloud services they are undeniably an important part of Microsoft’s business. (And they also own a large chunk of the gaming industry nowadays).
- Forgeties79 1y ago>(And they also own a large chunk of the gaming industry nowadays). They’re shuttering half their studios, cancelling half their games, and firing game devs by the thousands as they hand halo over to PlayStation lol. You’re technically right but they clearly aren’t taking that part of their business seriously anymore. IIRC Gamepass has plateaued on subscribers for years now even prior to their very aggressive price hikes over the last 18 months. I saw an article the other day that said Microsoft is telling developers they have to have a 30% return on their games, which is almost double the industry standard. That’s just absurd. Edit: worth mentioning that you have people openly speculating at this point that they might not even make another Xbox. I’m not quite in that camp, but I also think it is a distinct possibility given the back slide they are clearly in right own when it comes to gaming. Fun fact: It’s been 4 console cycles, almost 25 years, since we saw a major player drop out.
- mosura 1y agoThe other commenters in here oblivious to the history of companies like Amazon and Google. Profit is what you have when you have no confidence in how to reinvest what you earn already.
- elif 1y agoThis is exactly why I am telling people the AI bubble is different. It is not poppable, even if it's size is bigger than other bubbles. Megacorps control so much of them that the financial side has so little volatility.
- alangibson 1y agoNo seriously this time line really will go up forever guys.
- techblueberry 1y agoI don’t know about forever, but there’s a reason all these companies gave so much money to Trump. I think it can keep going up a while.
- mrbungie 1y agoI've heard that one too!, but seriously, it could keep going for a while.
- alangibson 1y agoI figure it's at least a couple of years until the Great Disappointment sets in. When you've been investing half a trillion a year with no realistic hope of a descent ROI, you'll do anything you can to not admit your error.
- conartist6 1y agoHahahaha, that's the spirit. We're invincible. Unsinkable. Nothing could ever stop the music : )
- marbro 1y agoBy analogy, think about the government. They've been printing money since August 1971, the price of gold has increased from $35 to $4000, and people still accept dollars rather than gold, and even Switzerland sold their gold because they believe that paper money is better. THe party can last forever!
- JCM9 1y agoThe real story will be when companies report valuation losses from their investments in AI companies after the bubble bursts, or even deflates a bit. Expect lots of hand wavy “non-GAAP” numbers pushed by leadership trying to gloss over their failed AI investments. That’s earnings call speak for “If you ignore the pile of your money we lost with bad AI investment decisions, we’ve had a good quarter. Moving on…”
- alangibson 1y agoMost of these data centers are built with special purpose vehicles to make the balance sheet look better. Imagine the gnashing of teeth when those get written down
- JCM9 1y agoYes… a lot of this is pretty hidden on the balance sheets but eventually GAAP catches up one way or another.
- bwfan123 1y agoI am surprised and glad that journalists are reporting on this. OpenAI is the hinge in the whole AI bubble, and it has every incentive to keep its financials private if it is not very flattering. So, thats the place to look for funny business - specially given their outlandish and provocative announcements of 16GW of datacenter buildouts which defies economic sense and demands more scrutiny.
- choudharism 1y agoThey're doing hundreds of billions of revenue a year, a one-off 4.7B to OAI honestly sounds like nothing on that balance sheet.
- an0malous 1y agoReuters says $12B: https://www.reuters.com/business/openai-hits-12-billion-annualized-revenue-information-reports-2025-07-31/ https://www.reuters.com/business/openai-hits-12-billion-annu...
- sealeck 1y agoThis sounds like a terrible approach to accounting. Surely large public companies should account for their expenditure at greater fidelity than billions.
- exasperaited 1y agoBut hey they are betting on optimism!
- _sword 1y agoThis is a silly article. Since MSFT took a ~49% stake in OpenAI, it records its share of OpenAI's net losses in the other income line under the equity method of accounting. MSFT is offsetting its taxable income based on a prior investment
- toxic72 1y agoI always chuckle when tech writers take a stab at financial statements
- zerosizedweasle 1y agoHeard on the Street is the financial side of the WSJ.
- financetechbro 1y agoThis is a funny sentence bc I consider the WSJ to be a financial news source in general
- zerosizedweasle 1y agoIt's from the financial side of a financially focused paper.
- bunderbunder 1y agoMoreover, the author of this article is the reporter who first reported on Enron's sketchy accounting: https://en.wikipedia.org/wiki/Jonathan_Weil https://en.wikipedia.org/wiki/Jonathan_Weil
- HaZeust 1y agoAnything else you can add to the conversation?
- logankeenan 1y agoCan you elaborate on this a bit more? Does that mean OpenAI had a ~$9.4 billion loss so MSFT needs to put 49% of that loss in their books?
- raverbashing 1y ago"How is it a write-off?" "They just write it off." "Write it off what?" "Jerry, all these big companies, they write off everything."
- latexr 1y agohttps://www.youtube.com/watch?v=XEL65gywwHQ https://www.youtube.com/watch?v=XEL65gywwHQ
- Deegy 1y agoYou don't even know what a write-off is do you?
- cruffle_duffle 1y agoI love that bit. So many people think write offs mean you get the thing for free somehow. No, no you do not get the thing for free.
- thisisauserid 1y agoOh, so they did lay people off because of AI.
- neonate 1y agohttps://www.msn.com/en-us/money/companies/microsoft-needs-to-open-up-more-about-its-openai-dealings/ar-AA1Pg1O4 https://www.msn.com/en-us/money/companies/microsoft-needs-to...
- isolay 1y agoThey can open up all day long, I still don't want them forcing "AI" down my throat.
- JCM9 1y agoCompanies have a lot of tools at their disposal to hide things on their balance sheet for a while. However when that happens it typically means the numbers are bad. Really bad. If they weren’t, they’d do everything they can to highlight how great the investment is going. Same reason why seemingly every CEO on the planet is making hand wavy statements about how their company is leading with AI and it will revolutionize their industry, and yet almost nobody is willing to break out this amazing stuff in their P&L. Funny how that works.
- zerosizedweasle 1y agoEven if this isn't Enrony, this sounds so Enrony (if you know anything about the Enron accounting scandal) "How Microsoft has managed to avoid disclosing such basic details is baffling. The company in its financial reports identifies OpenAl as an equity-method investment. That means OpenAl, by definition, is a related party of Microsoft under the accounting rules. Microsoft, however, doesn't identify OpenAl in its financial reports as a related party, and doesn't say anything about its transactions with OpenAl in its related-party disclosures."
- deleted 1y ago[deleted]
- KoolKat23 1y agoIf its equity accounted it won't be considered a related party as far as I understand. Related party in IFRS isnt what you think it is. Its the equivalent of "extended family".
- kgwgk 1y agohttps://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/financial_statement_/financial_statement___18_US/chapter_26_related_p_US/265_common_related_p_US.html https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/fin... 26.5 Common related party transactions In order to comply with the related party disclosure requirements, a reporting entity must identify all of its transactions with related parties.[…] 26.5.1 Disclosure of related party equity method investments Equity method investees are, by definition, related parties of the equity holder.
- Forgeties79 1y agoMaybe I just don’t know this writer very well but this is a surprising take to see on the WSJ
- pluc 1y agoMicrosoft and open... I know kids these days don't bother learning the story of things but... that's a hard sell.
- throwaway13337 1y agoDoes Microsoft even have an OpenAI stake? Their original more public deal was revenue sharing up until they reached 100x $1 billion. That doesn't sound like a stake. They also had tech sharing valid until the OpenAI board declares 'AGI'. That seems like a really bad deal. And that was probably at the time when Microsoft had the most leverage to make a deal. Their subsequent deals would make sense to be worse.
- financetechbro 1y agoThey have a very creative investment structure but they do own a stake in OpenAI. It’s just sounds more like a commercial agreement the way it was laid out, which primarily has to do with OAIs organizational structure
- throwaway13337 1y agoIf the deal is still based around capped revenue, I wouldn't call it an ownership stake. As far as I know, they have not disclosed it. If you have more information about something concrete regarding ownership, I'd love to hear it. Maybe I haven't understood everything that was stated. In the end, whatever Microsoft has is probably less valuable than a sizable ownership chunk that most people seem to assume. I imagine a lot of people are investing in Microsoft as a proxy to OpenAI. Those people are set to be disappointed.
- HWR_14 1y agoOpenAI and MS have been negotiating about turning that into a straight percentage of equity.
- odie5533 1y agoMicrosoft won't even publicly say how much they paid to help demolish the East Wing of the White House. https://www.cnbc.com/2025/10/23/trump-white-house-east-wing-ballroom-donors-apple-amazon-meta-microsoft-google.html https://www.cnbc.com/2025/10/23/trump-white-house-east-wing-...
- jpadkins 1y agoNote on how to spot propaganda: use of the phrase "demolish the East Wing..." is used to get an emotional effect, instead of the more factual "build a new ballroom for the White House" statement.
- sealeck 1y agoGlad that every statement of personal opinion is now "propaganda"...
- jpadkins 1y agoThis isn't a subject that needs opinions. "Microsoft donated to a new ball room for the east wing of the White House." is a neutral, factual statement.
- sealeck 1y agoAs is "Donald Trump ordered the demolition of the existing east wing of the White House, in order to construct a new ballroom on that site. Microsoft has funded this construction work."
- KaHasjG 1y agoNo, it is humorous. Everyone knows the story and there is literally a link to a publication owned by one of the other donors (with full disclosure). I mean, it would have been possible to examine the birthday letters of Myhrvold and Trump and a couple of Trump quotations to put the financing into context.
- nicce 1y ago
- agigao 1y agoTim Berners Lee: during .com bubble, companies were high on marketing and low on profits.
- jonny_eh 1y agoLike Amazon?
- sxndmxn 1y agoNo they don't
- raw_anon_1111 1y agoI always had a critical eye on the huge missteps that Microsoft had especially when it came to acquisitions like Danger, Nokia, whatever the ad network they bought and wrote down, etc. And then I listened to an Acquired podcast about Microsoft when they interviewed Ballmer as part of the research. He said “At the end of the day, it was only money”. In other words, Microsoft was throwing off so much money from their profitable businesses, they could afford to lose money and take risks without it having any meaningful impact on the company. The deal with OpenAI is really a nothingburger as far as cash. They aren’t spending any. They are giving OpenAI Azure credits and in return have a huge upside potential.
- lukeschlather 1y agoYeah I find it really funny how companies are being lambasted essentially for investing in R&D. How dare they put money into anything that isn't guaranteed to yield profits this year! It's positively anti-capitalist!
- HWR_14 1y agoThe most valuable thing MS gets from its OpenAI dealings is that they can incorporate its AI in all their products. If you look at it as a defensive move to protect the value of Office, Windows, etc. from an AI focused competitor it's worth absorbing the losses. But try showing that on a balance sheet! Plus, of course, if OpenAI makes money, that's also good for them.
- Razengan 1y agoWe should be more worried about OpenAI forever twisting the word "Open" the same way as the "Democratic"/"Republic" in the names of countries like North Korea etc.
- 1vuio0pswjnm7 1y agoText-only: https://assets.msn.com/content/view/v2/Detail/en-in/AA1Pg1O4/ https://assets.msn.com/content/view/v2/Detail/en-in/AA1Pg1O4...
- daviscaoimhe30 1y ago[dead]