Microsoft and Its OpenAI Losses

You may have seen articles in the mainstream business press lately questioning the strength of the AI investment boom. Are AI pioneers like OpenAI and Anthropic making any money? If they’re not, do we know how much money they’re losing? And are those losses showing up on the books of other tech companies, that financial analysts could get a better sense of the true picture here? 

As always, Calcbench is on the case. 

Let’s start with Microsoft ($MSFT), which has been investing in OpenAI for years, primarily via cloud computing resources Microsoft provides to the generative AI startup. In its quarterly report from Oct. 29, Microsoft reported a $4.1 billion loss from those investments, up from a $688 million loss in the year-earlier period. See Figure 1, below.

We were intrigued. If Microsoft is reporting a $4.1 billion loss on OpenAI today and a $688 million loss one year ago, what other losses has it disclosed related to OpenAI in the past? 

Alas, we can’t really tell. Microsoft only started reporting OpenAI-specific disclosures one year ago, at the start of its fiscal 2025; that’s the $688 million loss, reported under the “Other Income, Net” line item. Prior to that period, Microsoft didn’t mention OpenAI losses at all.

Even starting in Q1 2025, however, Microsoft described the OpenAI losses in rather vague terms. Microsoft reported an Other Income loss in that period of $683 million, “primarily reflect[ing] net recognized losses on equity method investments, including OpenAI.” 

The word “primarily” is doing a lot of work in that sentence. Investors at that point in time didn’t know whether “primarily” meant almost all of the $683 million loss, or 51 percent of it, or something in between. Only now, one year later, can we see that “primarily” meant essentially all of the Other Income net losses that quarter. 

If we chart Microsoft’s Other Income losses from Q1 2025 (when we get the first mention of OpenAI’s relevance to that line item) forward, we get Figure 2, below.

Again, we don’t know precisely how much OpenAI was responsible for those losses throughout the first four fiscal periods, but clearly it was a lot — and then losses soared in this most recent quarter, to the point where Microsoft started disclosing exact numbers. 

What Else Microsoft Is Saying

We also used the text search feature in our Disclosures & Footnotes Query page to see what else Microsoft has said about its exposure to OpenAI. Tucked away in the Management Discussion & Analysis of last week’s 10-Q we found this (emphasis added by us):

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.

Umm, wow. Microsoft’s total diluted EPS for its most recent period was $3.72 — so if the company didn’t have that OpenAI loss, diluted EPS would’ve been 11 percent higher. 

Even more interesting is that OpenAI losses went from a $0.07 drag on EPS one year ago to a $0.41 drag today, a six-fold increase. By comparison, total EPS rose only 12.7 percent (from $3.30 EPS one year ago to $3.72 EPS now.) 

So those OpenAI losses are growing, and growing so fast that Microsoft has decided to start reporting them; which means Microsoft believes the OpenAI relationship is material to investors. Going forward, presumably Microsoft will keep disclosing those OpenAI losses — or, in theory, any OpenAI profits, if the company ever starts making money. 

Either way, it’s a useful glimpse into the state of OpenAI and its relationship to Microsoft. You just need to know where to look, and have the right tool to help you translate data into insight.