Earlier this week, I reported that Microsoft had filed a $4.7 billion loss by OpenAI in its annual report for the fiscal year ending June 30 under “other expenses”. Speculations suggested that the tech giant was being less than truthful about its financials to keep investors enthused about the ever-evolving landscape, despite not having a clear-cut path to profitability.
However, Microsoft’s recent financial results for FY26 Q1 ending September 30 seemingly disclosed some interesting details and insights into the company’s dealings with OpenAI.
Perhaps more interestingly, buried deep in the report, several passages seemingly suggest that OpenAI might have incurred a $11.5 billion loss in the quarter that just ended (via The Register).
As highlighted on page 9 of Microsoft’s official earnings report:
“We have an investment in OpenAI Global, LLC (“OpenAI”) and have made total funding commitments of $13 billion, of which $11.6 billion has been funded as of September 30, 2025. The investment is accounted for under the equity method of accounting, with our share of OpenAI’s income or loss recognized in other income (expense), net.”
While the loss is obscured by financial and corporate jargon, the second sentence in the highlighted statement offers a clear equity breakdown, showing how OpenAI’s profits and losses affect Microsoft’s net income.
More details about Microsoft and OpenAI’s financial dealings are highlighted in the report as follows:
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“Current year net income and diluted EPS were negatively impacted by net losses from investments in OpenAI, which resulted in a decrease in net income and diluted EPS of $3.1 billion and $0.41, respectively. Prior year net income and diluted EPS were negatively impacted by net losses from investments in OpenAI, which resulted in a decrease in net income and diluted EPS of $523 million and $0.07, respectively.”
This news comes after Microsoft and OpenAI renewed their vows in a new definitive agreement, which revealed that Microsoft now owns 27% of OpenAI Public Benefit Corporation (PBC), translating to $135 billion on an as-converted diluted basis.
This means Microsoft will incur 27% of OpenAI’s losses and profits. Disclosing that Microsoft lost $3.1 billion of its net income to account for its share of OpenAI losses, potentially suggests that the ChatGPT maker might have lost approximately $11.5 billion in the quarter that just ended.
While Microsoft declined to comment on the matter, it confirmed to The Register that the $3.1 billion loss reflected in the report represents its current fiscal year, which started on July 1 and ran to Sept 30.
FAQ
Is OpenAI a profitable company?
Despite holding a significant lead in the competitive AI landscape, the company seemingly continues to struggle with its finances, often leaning on investors to keep its operations afloat through rounds of funding — recently pushing its market capitalization to $500 billion.
How much revenue does OpenAI generate annually?
Amid claims that the AI firm is on the verge of bankruptcy, a report suggested that OpenAI generates up to $2 billion annually from ChatGPT and an additional $ 1 billion from LLM access fees, translating to approximately $3.5 billion and $4.5 billion annually.
How does OpenAI spend its money?
The AI startup reportedly spends $7 billion on training its AI models and $1.5 billion on staffing despite generating only approximately $3.5 billion in revenue.
