Microsoft CFO says OpenAI investment will cut into profit this quarter
Microsoft has invested over $13 billion in OpenAI, a bet that's weighing on the company's profitability.
Microsoft's massive investment in OpenAI is weighing on earnings.
Following Microsoft's quarterly earnings report on Wednesday, CFO Amy Hood said she expects the company to take a $1.5 billion hit to income in the current period, mainly because of an expected loss from OpenAI.
Microsoft has invested close to $14 billion in OpenAI, whose ChatGPT assistant has gone viral and inspired a whole new industry called generative artificial intelligence. The trend has generated billions of dollars in new revenue for Microsoft.
But OpenAI is losing bundles of cash. The company expects $5 billion in losses this year, before stock-based compensation, on $4 billion in revenue, The Information reported earlier this month, citing documents.
Hood said that for Microsoft, the loss is accounted for under the equity method. The accounting approach refers to a company's share of the invested company's profit or loss in a given period, a Microsoft spokesperson said.
The additional detail is "not due to a change in our partnership or investment in OpenAI," the spokesperson said in an email. "Our partnership with OpenAI continues to deliver results, as we build differentiated IP and drive revenue momentum."
The earnings call came after Microsoft reported an earnings and revenue beat for the fiscal first quarter. However, the stock slid in extended trading after the company's forecast called for slower-than-expected growth.
While OpenAI is a central part of Microsoft's growth strategy, the company has been hedging its bets after integrating OpenAI's models into several products and acting as the startup's exclusive cloud infrastructure provider. On Tuesday, Microsoft's GitHub subsidiary said it would allow developers to power the Copilot Chat feature with models from Google or startup Anthropic instead of OpenAI's GPT-4o.
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