8-K
MICROSOFT CORP (MSFT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 28, 2025
Microsoft Corporation
| Washington | 001-37845 | 91-1144442 |
|---|---|---|
| (State or Other Jurisdiction<br><br>of Incorporation) | (Commission<br><br>File Number) | (IRS Employer<br><br>Identification No.) |
| One Microsoft Way, Redmond, Washington 98052-6399 | ||
| --- |
(425) 882-8080
www.microsoft.com/investor
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
|---|---|---|
| | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| --- | --- | |
| | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| --- | --- | |
| | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
| --- | --- | |
| Securities registered pursuant to Section 12(b) of the Act: | ||
| --- | --- | --- |
| Title of each class | Trading Symbol | Name of exchange on which registered |
| Common stock, $0.00000625 par value per share | MSFT | Nasdaq |
| 3.125% Notes due 2028 | MSFT | Nasdaq |
| 2.625% Notes due 2033 | MSFT | Nasdaq |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02. | Results of Operations and Financial Condition |
|---|
On October 29, 2025, Microsoft Corporation issued a press release announcing its financial results for the fiscal quarter ended September 30, 2025. A copy of the press release is furnished as Exhibit 99.1 to this report.
| Item 7.01. | Regulation FD Disclosure |
|---|
On October 28, 2025, Microsoft Corporation posted a blog titled "The next chapter of the Microsoft-OpenAI partnership." A copy of the blog is furnished as Exhibit 99.2 to this report.
Microsoft Corporation is also furnishing an investor presentation titled "First Quarter Fiscal Year 2026 Results." A copy of the presentation is furnished as Exhibit 99.3 to this report.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibits 99.1, 99.2, and 99.3, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01. | Financial Statements and Exhibits |
|---|
(d) Exhibits:
| 99.1 | Press release, dated October 29, 2025, issued by Microsoft Corporation |
|---|---|
| 99.2 | Microsoft blog, dated October 28, 2025, titled "The next chapter of the Microsoft-OpenAI partnership" |
| 99.3 | Investor presentation, dated October 29, 2025, titled "First Quarter Fiscal Year 2026 Results" |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MICROSOFT CORPORATION | |
|---|---|
| Date: October 29, 2025 | /s/ ALICE L. JOLLA |
| Alice L. Jolla | |
| Corporate Vice President and<br><br>Chief Accounting Officer |
EX-99.1
Exhibit 99.1
Microsoft Cloud and AI Strength Drives First Quarter Results
REDMOND, Wash. — October 29, 2025 — Microsoft Corp. today announced the following results for the quarter ended September 30, 2025, as compared to the corresponding period of last fiscal year:
- Revenue was $77.7 billion and increased 18% (up 17% in constant currency)
- Operating income was $38.0 billion and increased 24% (up 22% in constant currency)
- Net income, on a GAAP basis, was $27.7 billion and increased 12%, and on a non-GAAP basis was $30.8 billion and increased 22% (up 21% in constant currency)
- Diluted earnings per share, on a GAAP basis, was $3.72 and increased 13%, and on a non-GAAP basis was $4.13 and increased 23% (up 21% in constant currency)
- Non-GAAP results exclude the impact from investments in OpenAI, explained in the Non-GAAP Definition section below
“Our planet-scale cloud and AI factory, together with Copilots across high value domains, is driving broad diffusion and real-world impact,” said Satya Nadella, chairman and chief executive officer of Microsoft. “It’s why we continue to increase our investments in AI across both capital and talent to meet the massive opportunity ahead.”
“We delivered a strong start to the fiscal year, exceeding expectations across revenue, operating income, and earnings per share,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “Continued strength in the Microsoft Cloud reflects the growing customer demand for our differentiated platform.”
The following table reconciles our financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.
| Three Months Ended September 30, | ||
|---|---|---|
| ($ in millions, except per share amounts) | Net Income | Diluted<br>Earnings<br>per Share |
| 2024 As Reported (GAAP) | $24,667 | $3.30 |
| Impact from investments in OpenAI | 523 | 0.07 |
| 2024 As Adjusted (non-GAAP) | $25,190 | $3.37 |
| 2025 As Reported (GAAP) | $27,747 | $3.72 |
| Impact from investments in OpenAI | 3,086 | 0.41 |
| 2025 As Adjusted (non-GAAP) | $30,833 | $4.13 |
| Percentage Change Y/Y (GAAP) | 12% | 13% |
| Percentage Change Y/Y Constant Currency | 11% | 11% |
| Percentage Change Y/Y (non-GAAP) | 22% | 23% |
| Percentage Change Y/Y (non-GAAP) Constant Currency | 21% | 21% |
Business Highlights
Microsoft Cloud revenue was $49.1 billion and increased 26% (up 25% in constant currency), and commercial remaining performance obligation increased 51% to $392 billion.
Revenue in Productivity and Business Processes was $33.0 billion and increased 17% (up 14% in constant currency), with the following business highlights:
Microsoft 365 Commercial cloud revenue increased 17% (up 15% in constant currency)
Microsoft 365 Consumer cloud revenue increased 26% (up 25% in constant currency)
LinkedIn revenue increased 10% (up 9% in constant currency)
Dynamics 365 revenue increased 18% (up 16% in constant currency)
Revenue in Intelligent Cloud was $30.9 billion and increased 28% (up 27% in constant currency), with the following business highlights:
- Azure and other cloud services revenue increased 40% (up 39% in constant currency)
Revenue in More Personal Computing was $13.8 billion and increased 4%, with the following business highlights:
- Windows OEM and Devices revenue increased 6%
- Xbox content and services revenue increased 1% (relatively unchanged in constant currency)
- Search and news advertising revenue excluding traffic acquisition costs increased 16% (up 15% in constant currency)
Microsoft returned $10.7 billion to shareholders in the form of dividends and share repurchases in the first quarter of fiscal year 2026.
Business Outlook
Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.
Quarterly Highlights, Product Releases, and Customer Stories
Every quarter Microsoft delivers hundreds of products, services, and enhancements. These releases are driven by years of significant research and development investments, to empower customers with greater productivity, security, and differentiated value.
This momentum is reflected in stories that showcase how our technology is shaping industries and driving customer success. We share innovation updates on our product blogs across Azure, Microsoft 365, and more on our Official Microsoft blog.
Webcast Details
Satya Nadella, chairman and chief executive officer, Amy Hood, executive vice president and chief financial officer, Alice Jolla, chief accounting officer, Keith Dolliver, corporate secretary and deputy general counsel, and Jonathan Neilson, vice president of investor relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company’s performance for the quarter and certain forward-looking information. To access the earnings call, dial (877) 407-0666 or +1-201-689-8023 for international. The webcast will be available at http://www.microsoft.com/en-us/investor for replay through the close of business on September 30, 2026.
Non-GAAP Definition
Impact from investments in OpenAI. In the first quarter of fiscal year 2026, net income and diluted earnings per share were impacted by losses from investments in OpenAI, which resulted in a decrease in net income and diluted earnings per share of $3.1 billion and $0.41, respectively. In the first quarter of fiscal year 2025, net income and diluted earnings per share were impacted by losses from investments in OpenAI, which resulted in a decrease in net income and diluted earnings per share of $523 million and $0.07, respectively.
Microsoft has provided non-GAAP financial measures related to the impact from investments in OpenAI to aid investors in better understanding our performance. Microsoft believes these non-GAAP measures assist investors by providing additional insight into its operational performance and help clarify trends affecting its business. For comparability of reporting, management considers non-GAAP measures in conjunction with GAAP financial results in evaluating business performance. The non-GAAP financial measures presented in this release should not be
considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
Constant Currency
Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
Financial Performance Constant Currency Reconciliation
| Three Months Ended September 30, | ||||
|---|---|---|---|---|
| ($ in millions, except per share amounts) | Revenue | Operating<br>Income | Net Income | Diluted<br>Earnings<br>per Share |
| 2024 As Reported (GAAP) | $65,585 | $30,552 | $24,667 | $3.30 |
| 2024 As Adjusted (non-GAAP) | $65,585 | $30,552 | $25,190 | $3.37 |
| 2025 As Reported (GAAP) | $77,673 | $37,961 | $27,747 | $3.72 |
| 2025 As Adjusted (non-GAAP) | $77,673 | $37,961 | $30,833 | $4.13 |
| Percentage Change Y/Y (GAAP) | 18% | 24% | 12% | 13% |
| Percentage Change Y/Y (non-GAAP) | 18% | 24% | 22% | 23% |
| Constant Currency Impact | $1,015 | $730 | $430 | $0.06 |
| Percentage Change Y/Y Constant Currency | 17% | 22% | 11% | 11% |
| Percentage Change Y/Y (non-GAAP) Constant Currency | 17% | 22% | 21% | 21% |
Segment Revenue Constant Currency Reconciliation
| Three Months Ended September 30, | |||
|---|---|---|---|
| ($ in millions) | Productivity and<br>Business Processes | Intelligent Cloud | More Personal<br>Computing |
| 2024 As Reported (GAAP) | $28,317 | $24,092 | $13,176 |
| 2025 As Reported (GAAP) | $33,020 | $30,897 | $13,756 |
| Percentage Change Y/Y (GAAP) | 17% | 28% | 4% |
| Constant Currency Impact | $656 | $251 | $107 |
| Percentage Change Y/Y Constant Currency | 14% | 27% | 4% |
Selected Product and Service Revenue Constant Currency Reconciliation
| Three Months Ended September 30, 2025 | |||
|---|---|---|---|
| Percentage Change Y/Y (GAAP) | Constant Currency Impact | Percentage Change Y/Y Constant Currency | |
| Microsoft Cloud | 26% | (1)% | 25% |
| Commercial remaining performance obligation | 51% | 0% | 51% |
| Microsoft 365 Commercial cloud | 17% | (2)% | 15% |
| Microsoft 365 Consumer cloud | 26% | (1)% | 25% |
| 10% | (1)% | 9% | |
| Dynamics 365 | 18% | (2)% | 16% |
| Azure and other cloud services | 40% | (1)% | 39% |
| Windows OEM and Devices | 6% | 0% | 6% |
| Xbox content and services | 1% | (1)% | 0% |
| Search and news advertising excluding traffic acquisition costs | 16% | (1)% | 15% |
About Microsoft
Microsoft (Nasdaq “MSFT” @microsoft) creates platforms and tools powered by AI to deliver innovative solutions that meet the evolving needs of our customers. The technology company is committed to making AI available broadly and doing so responsibly, with a mission to empower every person and every organization on the planet to achieve more.
Forward-Looking Statements
Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:
intense competition in all of our markets that could adversely affect our results of operations;
focus on cloud-based and AI services presenting execution and competitive risks;
significant investments in products and services that may not achieve expected returns;
acquisitions, joint ventures, and strategic alliances that could have an adverse effect on our business;
cyberattacks and security vulnerabilities that could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position;
disclosure and misuse of personal data that could cause liability and harm to our reputation;
the possibility that we may not be able to protect information in our products and services from use by others;
abuse of our advertising, professional, marketplace, or gaming platforms that may harm our reputation or user engagement;
products and services, how they are used by customers, and how third-party products and services interact with them, presenting security, privacy, and execution risks;
issues about the use of AI in our offerings that may result in reputational or competitive harm, or liability;
excessive outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure;
supply or quality problems;
potential consequences of new, existing, and evolving legal and regulatory requirements;
claims against us that could result in adverse outcomes in legal disputes;
uncertainties relating to our business with government customers;
additional tax liabilities;
an inability to protect and utilize our intellectual property may harm our business and operating results;
claims that Microsoft has infringed the intellectual property rights of others;
damage to our reputation or our brands that may harm our business and results of operations;
adverse economic or market conditions that could harm our business;
catastrophic events or geopolitical conditions, such as the COVID-19 pandemic, that could disrupt our business;
exposure to increased economic and operational uncertainties from operating a global business, including the effects of foreign currency exchange; and
the dependence of our business on our ability to attract and retain talented employees.
For more information about risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website at http://www.microsoft.com/en-us/investor.
All information in this release is as of September 30, 2025. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.
For more information, press only:
Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, rrt@we-worldwide.com
For more information, financial analysts and investors only:
Jonathan Neilson, Vice President, Investor Relations, (425) 706-4400
Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news. Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information is available at http://www.microsoft.com/en-us/investor.
MICROSOFT CORPORATION
INCOME STATEMENTS
(In millions, except per share amounts) (Unaudited)
| Three Months Ended<br>September 30, | ||
|---|---|---|
| 2025 | 2024 | |
| Revenue: | ||
| Product | $15,922 | $15,272 |
| Service and other | 61,751 | 50,313 |
| Total revenue | 77,673 | 65,585 |
| Cost of revenue: | ||
| Product | 2,922 | 3,294 |
| Service and other | 21,121 | 16,805 |
| Total cost of revenue | 24,043 | 20,099 |
| Gross margin | 53,630 | 45,486 |
| Research and development | 8,146 | 7,544 |
| Sales and marketing | 5,717 | 5,717 |
| General and administrative | 1,806 | 1,673 |
| Operating income | 37,961 | 30,552 |
| Other expense, net | (3,660) | (283) |
| Income before income taxes | 34,301 | 30,269 |
| Provision for income taxes | 6,554 | 5,602 |
| Net income | $27,747 | $24,667 |
| Earnings per share: | ||
| Basic | $3.73 | $3.32 |
| Diluted | $3.72 | $3.30 |
| Weighted average shares outstanding: | ||
| Basic | 7,433 | 7,433 |
| Diluted | 7,466 | 7,470 |
COMPREHENSIVE INCOME STATEMENTS
(In millions) (Unaudited)
| Three Months Ended | ||
|---|---|---|
| September 30, | ||
| 2025 | 2024 | |
| Net income | $27,747 | $24,667 |
| Other comprehensive income (loss), net of tax: | ||
| Net change related to derivatives | (3) | (10) |
| Net change related to investments | 687 | 1,114 |
| Translation adjustments and other | (98) | 304 |
| Other comprehensive income | 586 | 1,408 |
| Comprehensive income | $28,333 | $26,075 |
BALANCE SHEETS
(In millions) (Unaudited)
| September 30,<br>2025 | June 30,<br>2025 | |
|---|---|---|
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $28,849 | $30,242 |
| Short-term investments | 73,163 | 64,323 |
| Total cash, cash equivalents, and short-term investments | 102,012 | 94,565 |
| Accounts receivable, net of allowance for doubtful accounts of $687 and $944 | 52,894 | 69,905 |
| Inventories | 1,130 | 938 |
| Other current assets | 33,030 | 25,723 |
| Total current assets | 189,066 | 191,131 |
| Property and equipment, net of accumulated depreciation of $98,880 and $93,653 | 230,861 | 204,966 |
| Operating lease right-of-use assets | 24,791 | 24,823 |
| Equity and other investments | 11,465 | 15,405 |
| Goodwill | 119,497 | 119,509 |
| Intangible assets, net | 21,236 | 22,604 |
| Other long-term assets | 39,435 | 40,565 |
| Total assets | $636,351 | $619,003 |
| Liabilities and stockholders' equity | ||
| Current liabilities: | ||
| Accounts payable | $32,580 | $27,724 |
| Current portion of long-term debt | 7,832 | 2,999 |
| Accrued compensation | 9,201 | 13,709 |
| Short-term income taxes | 3,655 | 7,211 |
| Short-term unearned revenue | 58,987 | 64,555 |
| Other current liabilities | 22,741 | 25,020 |
| Total current liabilities | 134,996 | 141,218 |
| Long-term debt | 35,376 | 40,152 |
| Long-term income taxes | 26,569 | 25,986 |
| Long-term unearned revenue | 2,546 | 2,710 |
| Deferred income taxes | 2,852 | 2,835 |
| Operating lease liabilities | 17,348 | 17,437 |
| Other long-term liabilities | 53,588 | 45,186 |
| Total liabilities | 273,275 | 275,524 |
| Commitments and contingencies | ||
| Stockholders' equity: | ||
| Common stock and paid-in capital - shares authorized 24,000; outstanding 7,434 and 7,434 | 110,964 | 109,095 |
| Retained earnings | 254,873 | 237,731 |
| Accumulated other comprehensive loss | (2,761) | (3,347) |
| Total stockholders' equity | 363,076 | 343,479 |
| Total liabilities and stockholders' equity | $636,351 | $619,003 |
CASH FLOWS STATEMENTS
(In millions) (Unaudited)
| Three Months Ended | ||
|---|---|---|
| September 30, | ||
| 2025 | 2024 | |
| Operations | ||
| Net income | $27,747 | $24,667 |
| Adjustments to reconcile net income to net cash from operations: | ||
| Depreciation, amortization, and other | 13,061 | 7,383 |
| Stock-based compensation expense | 2,983 | 2,832 |
| Net recognized gains on investments and derivatives | (1,007) | (125) |
| Deferred income taxes | 2,491 | (1,433) |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 16,490 | 14,037 |
| Inventories | (192) | (373) |
| Other current assets | (1,162) | (82) |
| Other long-term assets | (394) | (1,761) |
| Accounts payable | (614) | (916) |
| Unearned revenue | (5,418) | (5,553) |
| Income taxes | (2,944) | 1,016 |
| Other current liabilities | (5,507) | (5,479) |
| Other long-term liabilities | (477) | (33) |
| Net cash from operations | 45,057 | 34,180 |
| Financing | ||
| Repayments of debt, maturities of 90 days or less | 0 | (5,746) |
| Repayments of debt | 0 | (966) |
| Common stock issued | 689 | 706 |
| Common stock repurchased | (5,650) | (4,107) |
| Common stock cash dividends paid | (6,169) | (5,574) |
| Other, net | (669) | (889) |
| Net cash used in financing | (11,799) | (16,576) |
| Investing | ||
| Additions to property and equipment | (19,394) | (14,923) |
| Acquisition of companies, net of cash acquired and divestitures, and purchases of intangible and other assets | (578) | (1,849) |
| Purchases of investments | (17,671) | (1,620) |
| Maturities of investments | 6,031 | 2,136 |
| Sales of investments | 3,262 | 1,968 |
| Other, net | (6,209) | (913) |
| Net cash used in investing | (34,559) | (15,201) |
| Effect of foreign exchange rates on cash and cash equivalents | (92) | 122 |
| Net change in cash and cash equivalents | (1,393) | 2,525 |
| Cash and cash equivalents, beginning of period | 30,242 | 18,315 |
| Cash and cash equivalents, end of period | $28,849 | $20,840 |
SEGMENT RESULTS
(In millions) (Unaudited)
| Three Months Ended | ||
|---|---|---|
| September 30, | ||
| 2025 | 2024 | |
| Productivity and Business Processes | ||
| Revenue | $33,020 | $28,317 |
| Cost of revenue | 5,721 | 5,294 |
| Operating expenses | 6,892 | 6,507 |
| Operating income | $20,407 | $16,516 |
| Intelligent Cloud | ||
| Revenue | $30,897 | $24,092 |
| Cost of revenue | 12,314 | 8,614 |
| Operating expenses | 5,192 | 4,975 |
| Operating income | $13,391 | $10,503 |
| More Personal Computing | ||
| Revenue | $13,756 | $13,176 |
| Cost of revenue | 6,008 | 6,191 |
| Operating expenses | 3,585 | 3,452 |
| Operating income | $4,163 | $3,533 |
| Total | ||
| Revenue | $77,673 | $65,585 |
| Cost of revenue | 24,043 | 20,099 |
| Operating expenses | 15,669 | 14,934 |
| Operating income | $37,961 | $30,552 |
EX-99.2
Exhibit 99.2
The next chapter of the Microsoft–OpenAI partnership
Oct 28, 2025 | Microsoft Corporate Blogs
Since 2019, Microsoft and OpenAI have shared a vision to advance artificial intelligence responsibly and make its benefits broadly accessible. What began as an investment in a research organization has grown into one of the most successful partnerships in our industry. As we enter the next phase of this partnership, we’ve signed a new definitive agreement that builds on our foundation, strengthens our partnership, and sets the stage for long-term success for both organizations.
First, Microsoft supports the OpenAI board moving forward with formation of a public benefit corporation (PBC) and recapitalization. Following the recapitalization, Microsoft holds an investment in OpenAI Group PBC valued at approximately $135 billion, representing roughly 27 percent on an as-converted diluted basis, inclusive of all owners – employees, investors, and the OpenAI Foundation. Excluding the impact of OpenAI’s recent funding rounds, Microsoft held a 32.5 percent stake on an as-converted basis in the OpenAI for-profit.
The agreement preserves key elements that have fueled this successful partnership – meaning OpenAI remains Microsoft’s frontier model partner and Microsoft continues to have exclusive IP rights and Azure API exclusivity until Artificial General Intelligence (AGI).
It also refines and adds new provisions that enable each company to independently continue advancing innovation and growth.
What has evolved:
Once AGI is declared by OpenAI, that declaration will now be verified by an independent expert panel.
Microsoft’s IP rights for both models and products are extended through 2032 and now include models post-AGI, with appropriate safety guardrails.
Microsoft’s IP rights to research, defined as the confidential methods used in the development of models and systems, will remain until either the expert panel verifies AGI or through 2030, whichever is first. Research IP includes, for example, models intended for internal deployment or research only. Beyond that research IP does not include model architecture, model weights, inference code, finetuning code, and any IP related to data center hardware and software; and Microsoft retains these non-Research IP rights.
Microsoft’s IP rights now exclude OpenAI’s consumer hardware.
OpenAI can now jointly develop some products with third parties. API products developed with third parties will be exclusive to Azure. Non-API products may be served on any cloud provider.
Microsoft can now independently pursue AGI alone or in partnership with third parties.
If Microsoft uses OpenAI’s IP to develop AGI, prior to AGI being declared, the models will be subject to compute thresholds; those thresholds are significantly larger than the size of systems used to train leading models today.
The revenue share agreement remains until the expert panel verifies AGI, though payments will be made over a longer period of time.
OpenAI has contracted to purchase an incremental $250B of Azure services, and Microsoft will no longer have a right of first refusal to be OpenAI’s compute provider.
OpenAI can now provide API access to US government national security customers, regardless of the cloud provider.
OpenAI is now able to release open weight models that meet requisite capability criteria.
As we step into this next chapter of our partnership, both companies are better positioned than ever to continue building great products that meet real-world needs, and create new opportunity for everyone and every business.
