Microsoft's financial report included one expense that surprised analysts: a $4.1 billion charge related to its investment in OpenAI. This figure represents a 490% increase from the same period last year. Bernstein analyst Firoz. Firoz Valliji said that based on Microsoft’s last fiscal quarter report that it held a 32.5% stake in OpenAI, this meant that OpenAI’s quarterly loss exceeded US$12 billion.
This is because Microsoft uses an accounting method called the equity methodTo deal with its holdings in OpenAI, under this method, Microsoft only reports its share of losses or gains from the AI company. OpenAI was recently reorganized into a for-profit entity, with Microsoft taking a 27.5% stake in the future.
A three-month loss of $12 billion would be one of the largest single-quarter losses in the history of a technology company. That's not far off the $13 billion in revenue OpenAI has told investors it expects to achieve for the full year.
The specific details behind the losses are unclear because OpenAI does not release results publicly. The company faces huge computing costs as it invests heavily in training new AI models, and the industry is fighting a costly war for talent.
CEO Altman has told investors that the company expects to post years of hefty losses as OpenAI invests to become a leader in technologies it believes will transform the economy.
"Whether we burn $500 million, $5 billion, or $50 billion a year, I don't care. I really don't care. It's going to be expensive. But it's totally worth it," he said in a talk at Stanford University last year.