OpenAI’s Profit Crisis Linked to Huge Microsoft Payments

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0:38With RSS.com, starting your own podcast is free and easy. Upload an episode and we distribute it to Apple Podcasts, Spotify, Amazon Music, and more. Track your listeners, see where they're from, and start earning from ads just like this. If you've been thinking about starting a podcast, this is your sign. Start your new podcast for free today at RSS.com. New leaked documents are showing just how much money OpenAI is paying Microsoft. And the numbers might surprise you. This is after, obviously, a year of insane deals, rumors of an upcoming IPO from OpenAI. With all of this, there's a lot of financial scrutiny on OpenAI.

1:18It's definitely getting intensified. And with all of this, we have recently received some leaked documents that came from tech blogger Ed Zitron. And he gave a little bit of a glimpse into OpenAI's revenue, their financials, and all of that. And specifically, their compute costs, which a lot of people have been looking at, which is an eye-watering number. So according to his report, he said that in 2024, Microsoft received$493.8 million in revenue share payments from OpenAI. What's interesting is that that was last year, but if you fast forward to this year, that number jumped to$865.8 million.

2:01And that's just in the first three quarters of this year. So we have a whole, you know, another third quarter or fourth quarter that hasn't been reported in those numbers yet. And so at something like, you know,$865 million, you can assume it's going to be over a billion dollars that they're going to be paying Microsoft for this year alone. Now, all of this is part of the 20 % revenue share that OpenAI agreed to pay Microsoft as part of their previous investment. When OpenAI first came out with ChatGPT, they needed a lot of money. It was getting insanely popular. And Microsoft came in and invested$10 billion at the time.

2:36They've since invested a little more. So I think total, or actually, I think it was prior to that, they'd invested$1 billion and a little bit more. So total, I think Microsoft all in is at$13 billion. And with that, I think especially with that$10 billion that they gave OpenAI, they agreed to a 20 % revenue share. So 20 % of the revenue OpenAI made, they were going to pay to Microsoft. Neither people have also publicly confirmed that percentage, of the 20%, by the way, but this has been reported and leaked by a lot of different people. So this is where things get a little bit more, I guess, tricky.

3:11Microsoft already shares revenue with OpenAI. They give them about, and again, it's hard to verify numbers, but from leaked documents, about 20 % of the revenue from Bing and from Azure OpenAI service. Now, these are obviously partnerships that they've made with OpenAI because OpenAI's ChatGBT powers Bing right now. and also we have Bing inside of ChatGPT. So there's kind of like a lot of collaboration between the two companies and so it's been said that OpenAI is giving 20 % of their revenue because of the big investment back to Microsoft and then Microsoft is giving 20 % of revenue from things like Azure OpenAI Service which is basically using OpenAI on Azure so companies that go to their Azure or Microsoft's cloud program can do that.

3:57Also in regards to all of this money that they're making, there was a source that was recently talking to TechCrunch about this, and they said that these leaked payments that we see are talking about Microsoft's net revenue share, not their gross revenue share. So basically what that means is that they're not including whatever Microsoft paid to OpenAI for being an Azure, for their OpenAI royalties, for having OpenAI on their platforms and charging their customers for it. Microsoft deducts those numbers from its internally reported revenue share numbers, according to the person who leaked some of this info.

4:33So what's interesting here is Microsoft never breaks down how much money they're actually making from Bing and Azure OpenAI in their financial statement. So it's pretty hard to get a good estimate on how much they're currently kicking back in all of this. But regardless, all these leaked documents that we see give a pretty clear view into, you know, basically the biggest AI company on the market today and also one of the biggest private companies, you know, private market companies today that's not public. And it's not just how much money they're making in revenue, but it's also about how much money they're spending to generate that revenue.

5:10It's their compute cost that's also really interesting. Because based off of the really wildly, widely reported 20 % revenue share that everyone talks about between OpenAI and Microsoft, we can basically deduct that OpenAI's revenue was at least$2.5 billion last year. And this year, we can say that it was about$4.33 billion just in the first three quarters of 2025. So it's likely to be more. But I mean, based off of those numbers, that's what we can see. There are some other reports that came out of the information that said that OpenAI's 2024 revenue was about$4 billion, and that its revenue from the first half of this year was$4.3 billion.

5:49So we like slightly conflicting, but they're kind of all in the same ballpark. Sam Altman was actually asked about this. And of course, when a CEO is asked about their company, they always want to talk it up and make it seem like it's doing more. When he was asked about their revenue, he said that is, quote, well more. When he was referring to reports of$13 billion a year. So he was like, oh, we're doing way more than$13 billion a year. But he doesn't say what it is, of course. He said that by the end of this year, they're going to end it above$20 billion in annualized revenue run rate. So what's interesting here, though, he's not saying how much money they're making.

6:23He's just giving a projection, an annualized revenue run rate is just a projection on what he believes they'll be able to do in the following year, right? So saying like, yeah, we're going to end it. We're making way more money than$13 billion. Yeah, we're going to end the year with, you know, over$20 billion in annualized revenue run rates. It's like, okay, well, if all of your plans pan out, all of your growth strategies work, then you could do that. So anyways, I do think that's interesting and worth taking note of. They also, he also says that the company is going to hit$100 billion by 2026 in just two years.

6:56So apparently by the end of the year, they'll be set to be making$20 billion. And in two years, they're going to be set to be making$100 billion or they'll be making $100 billion. I don't know if that's actually going to happen, but this is what he says. according to Zytron who leaked a lot of this stuff and his analysis OpenAI might have well he so he didn't leak it he received the information from the leaker so he said that OpenAI may have spent about 3.8 billion in inference last year and that they've increased that to 8.65 billion in the first nine months in the first you know three quarters of this year Inference, right, is obviously just the compute used to run and train all these AI models.

7:38And, you know, it's basically the compute that they need to generate the responses they're giving to us. And OpenAI has historically almost exclusively used Microsoft Azure for their compute, right? Today, we're seeing a lot of new deals being struck by them. We're seeing CoreWeave, Oracle. They just made a huge one with AWS for like$38 billion over the next seven years. They have one with Google Cloud. They're making a lot more of these, but historically, it's mostly been Microsoft Azure just due to the nature of the$10 billion that Microsoft put in,$13 billion total, but$10 billion right after ChatGPT launched.

8:10And so there's some other reports that put OpenAI's entire compute spend at about$5.6 billion last year, and its cost of revenue at$2.5 billion for the first half of this year. So with all of that being said, there's some sources that are familiar with the matter. Names, not names. So take them with a grain of salt. But they're talking to TechCrunch about all of this. And they said that while OpenAI's training spend is mostly non-cash, right? So that means that a lot of it is credits that they're paying Microsoft. Microsoft gave them a bunch of credits. They're like, here's$10 billion, but a bunch of this is just credits to spend on Microsoft Azure for compute.

8:48That's kind of how the deal went. and so most of their spend is you know kind of these like tokens or credits that microsoft already gave them but there is a lot of spend that is largely cash when it comes to inference so their training spend is tokens but their inference right what they're using to service all of our requests when we're chatting with chat gpt all day long those are actually cash they got to pay so while this is not definitely a complete overview of everything happening with open ai and all of their finances. I think this gives us a really good idea of the inference costs and also the revenue.

9:22And I think the implications of this say that, you know, we're going to hear a lot more people talking about this quote unquote AI bubble. Because if OpenAI is really still running their models at a loss, that this means this is like a massive deal for the investment world who is spending tons of money on these AI models, the valuations are absolutely insane. But if OpenAI is not running at a profit, that means a lot of other people are not as well. Of course, OpenAI and Microsoft have both declined to comment on this story. But it is really interesting to see where this goes in the future. So thank you so much for tuning into the podcast.

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