OpenAI and Microsoft reach a "separation agreement": Microsoft's "revenue share" reduced to 8%

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With OpenAI and Microsoft finalizing new cooperation terms, OpenAI is expected to reduce revenue sharing payments by $50 billion.

On September 12, according to media reports, OpenAI has informed some shareholders that its revenue sharing ratio paid to Microsoft will drop significantly from nearly 20% this year, and is expected to fall to about 8% by 2030. This means that by 2030, OpenAI will be able to retain more than $50 billion of revenue for itself.

The negotiations between the two sides are not finished. Talks are still ongoing regarding key issues such as how the partnership will evolve once OpenAI achieves artificial general intelligence (AGI), and the costs for OpenAI to rent servers from Microsoft.

Significant Reduction in Revenue Sharing

According to the initial cooperation agreement, Microsoft was entitled to receive 20% of OpenAI’s revenue until 2030.

The new 8% revenue sharing ratio means that by 2030 OpenAI is expected to share nearly $56 billion in revenue with Microsoft and other partners, much lower than the previously estimated $74 billion.

It's still unclear why OpenAI expects its revenue sharing with Microsoft to be lower than the 20% specified in the original agreement.

Previously, however, some OpenAI executives hoped that Microsoft would exclude future products that have not yet been released from the existing revenue-sharing agreement, such as a PhD-level AI agent with a monthly fee as high as $20,000.

It is worth noting that this 8% target is more aggressive than predictions earlier this year. At that time, OpenAI expected to share about 10% of its revenue with partners by 2030.

The report points out that this year’s high 20% sharing ratio may reflect the agreement to support some Siri queries on Apple devices, although this cooperation does not seem to contribute much to OpenAI’s subscription sales.

Framework of Equity Restructuring Takes Shape

The two sides are also negotiating the arrangements after OpenAI achieves AGI.

AGI refers to artificial intelligence that reaches the same level of intelligence as humans. As previously mentioned by WallstreetCN, the current contract stipulates that once OpenAI proves its technology can achieve AGI, Microsoft will lose its exclusive access to OpenAI’s technology.

However, Microsoft is working to amend or completely remove this AGI clause. At the same time, the two sides are negotiating how much server resources OpenAI will rent from Microsoft.

Although many aspects of the agreement are still under discussion, some arrangements have already been basically finalized.

Under the new corporate structure, OpenAI’s non-profit organization and Microsoft are each expected to obtain about one-third of the shares. Currently, OpenAI allows employees to sell shares at a $500 billion valuation.

It is not yet clear whether the new non-binding cooperation agreement announced by Microsoft and OpenAI on Thursday includes changes in the latest revenue sharing plan that were shared with investors.

In the past few weeks, teams from both sides have been conducting intensive negotiations. OpenAI CFO Sarah Friar, Microsoft CFO Amy Hood, and their teams hold meetings every week to finalize restructuring details.

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