Microsoft reported a $3.1 billion decline in net income for its first fiscal quarter due to its ongoing investment in AI firm OpenAI. This accounting adjustment, reflecting the equity method valuation, caused a 41-cent drop in earnings per share.
Nonetheless, net income rose to $27.7 billion, or $3.72 per share, up from $24.67 billion, or $3.30 per share, a year earlier, showing strong underlying growth.
Since 2019, Microsoft has committed $13 billion to OpenAI, with $11.6 billion invested by September 2025. OpenAI recently restructured, with its nonprofit OpenAI Foundation owning 26% of its commercial arm, valued at about $130 billion. Employees and investors hold 47%, while Microsoft’s stake is now valued at $135 billion, roughly 27% ownership.
Microsoft also revealed that OpenAI will purchase an additional $250 billion worth of Azure cloud services but will no longer grant Microsoft the right of first refusal as a compute provider.
CEO Satya Nadella praised the partnership as “one of the most successful partnerships and investments our industry has ever seen,” highlighting the mutual benefits.
While the companies have collaborated for years, competition is growing. Microsoft listed OpenAI as a rival in its 2024 annual report, alongside tech giants like Amazon, Apple, Google and Meta. OpenAI’s recent launch of the SearchGPT engine signals ambitions to challenge Microsoft’s Bing and Google in search.
Microsoft integrates OpenAI’s models widely but has begun testing its own AI system to enhance its Copilot assistant, indicating a push toward internal AI development.
Strong overall performance was driven by a 40% increase in Azure revenues, surpassing forecasts and maintaining Microsoft’s growth momentum amid AI competition.