On Monday, Microsoft and OpenAI announced a renegotiated deal binding them. Both sides emerge as winners, despite some opinions framing it as a win for ChatGPT’s maker over Microsoft.
The new terms address a lingering issue for OpenAI since its substantial deal with Amazon.
With this new deal, Microsoft’s access to OpenAI’s products is no longer exclusive till the advent of AGI. Microsoft now has a non-exclusive license to OpenAI IP for models and products through 2032.
Microsoft remains OpenAI’s “primary cloud partner,” indicating Azure will predominantly serve OpenAI’s cloud needs for the next six years, as OpenAI builds its data centers with others. In October, OpenAI agreed to buy an additional $250 billion in Microsoft’s cloud services. This reassures Microsoft shareholders of OpenAI as a significant Azure customer.
OpenAI products will launch on Azure first unless Microsoft can’t support them. Critically, OpenAI can now offer its products to customers using any cloud provider.
The term “first” remains undefined, whether exclusive on Azure temporarily or whether Microsoft will be among all vendors hosting OpenAI’s latest products.
Importantly, this resolves potential legal issues where Microsoft might have sued OpenAI over its Amazon deal.
To recap: In February, OpenAI announced Amazon’s up-to-$50 billion investment, combining a $15 billion initial investment and another $35 billion contingent on certain, unspecified conditions.
OpenAI agreed to co-develop “stateful runtime technology” on AWS Bedrock, allowing AI agents to remember tasks and contexts. AWS was promised exclusive rights to OpenAI’s Frontier tool, which created a conflict.
OpenAI’s earlier agreement with Microsoft prevented exclusive selling of Frontier on AWS and might have prohibited AWS from selling it.
Microsoft, while allowing OpenAI products like ChatGPT on other clouds, maintained exclusive API access rights. The day OpenAI announced its AWS deal, Microsoft contested AWS’s exclusive terms.
“Microsoft maintains its exclusive license and access to intellectual property across OpenAI models and products… Any stateless API calls to OpenAI models from collaborations with third parties like Amazon would be hosted on Azure… OpenAI’s first-party products will continue to be hosted on Azure.”
Microsoft emphasized these terms were valid until OpenAI achieved AGI and even considered legal action to uphold them.
The new agreement ends Microsoft’s exclusivity, resolving the AWS legal threat. Amazon CEO Andy Jassy welcomed the deal, signaling OpenAI’s models would soon be available on AWS Bedrock.
While beneficial for OpenAI, Microsoft gains too. The new deal lets Microsoft stop revenue sharing with OpenAI; however, OpenAI will continue revenue sharing with a capped amount through 2030.
The exact financial benefit for Microsoft is unclear but likely substantial, with Microsoft noting $7.5 billion in profit from OpenAI investment last quarter.
Microsoft remains a significant OpenAI shareholder, holding about 27% of the for-profit entity as of October, benefiting financially from OpenAI’s growth including AWS sales.
However, Microsoft loses potential cloud services profits from an exclusive OpenAI deal.
This may not be significant as Microsoft builds new partnerships, like with OpenAI competitor Anthropic, to use its Claude AI for agentic products.
The real winners are enterprises, gaining the freedom to choose cloud models while tech giants compete to serve them.
Here’s a timeline of recent changes in Microsoft’s OpenAI partnership.
In October, Microsoft and OpenAI announce a new agreement allowing OpenAI to run non-API products on other clouds.
In November, OpenAI and Amazon sign a multi-year agreement for $38 billion in AWS cloud service.
In February, Amazon announces a potential $50 billion OpenAI investment, pending conditions like the exclusive deal for Frontier and stateful tech, which Microsoft contested.
In March, Microsoft considers legal action, as reported by FT.
In April, OpenAI and Microsoft announce a new deal ending their exclusivity and allowing OpenAI products on various clouds, with Microsoft ceasing revenue sharing but retaining its major OpenAI shareholding.
When you purchase through links in our articles, we may earn a small commission. This doesn’t affect our editorial independence.