Ahead of IPO Push, OpenAI Distances Itself from Microsoft Partnership

OpenAI and Microsoft MSFT have restructured their partnership again, shedding the last exclusivity deal with Azure, Microsoft’s cloud computing unit. The new agreement gives OpenAI flexibility and leverage as it moves toward a potential IPO this year.

“The greater predictability in the amended agreement strengthens our joint ability to build and operate AI platforms at scale while providing both companies the flexibility to pursue new opportunities,” the companies said in a joint statement.

Under the revised partnership, OpenAI can sell API access to its models through any cloud provider. Until now, the company was limited to hosting its API products developed with third parties on Azure. Now it can offer them across competing platforms like Amazon Web Services or Google Cloud. The agreement stipulates that OpenAI will launch its products on Azure, but it also says Microsoft can forgo that exclusivity if it so chooses or doesn’t have the capacity.

A change in the companies’ financial partnership is also central to the revised agreement. Microsoft’s revenue-sharing agreement with OpenAI is ending. In the past, Microsoft paid OpenAI when users accessed models through Azure. OpenAI will continue to share its revenue with Microsoft, but only through a set date in 2030 and subject to a “total cap.” This aspect of the agreement was originally supposed to be in place until OpenAI achieved true “artificial general intelligence.”

Following the immediate excitement from ChatGPT’s public launch in November 2022, Microsoft quickly committed $10 billion in 2023 to the company. But the relationship has since grown more complicated, especially after OpenAI changed its structure and sought new strategic computing partnerships with Microsoft’s cloud competitors, such as Amazon AMZN.

The revised agreement also gives OpenAI more leverage to compete with Anthropic, its chief competitor, which it has accused of inflating its revenue. “OpenAI removed all the overhangs Anthropic was built without,” explains PitchBook senior research analyst Harrison Rolfes. “OpenAI is definitely racing to look more like Anthropic. An IPO seems more likely, but they still have to tighten loose ends.”