Microsoft and OpenAI have signed a landmark agreement that reshapes one of tech’s most significant partnerships, establishing a $135 billion valuation for OpenAI while setting clear terms for the pursuit of artificial general intelligence (AGI). The deal supports OpenAI’s transition to a public benefit corporation, grants Microsoft a 27% ownership stake, and introduces an independent expert panel to verify when AGI is achieved.
What’s New in the Microsoft-OpenAI Partnership Agreement
The restructured partnership preserves core elements while introducing provisions that give both companies greater autonomy to innovate and collaborate with third parties.
Table of Contents
Microsoft’s 27% Stake and $135 Billion Valuation
Following OpenAI’s recapitalization, Microsoft holds an investment valued at approximately $135 billion, representing about 27% ownership on an as-converted diluted basis across all stakeholders including employees, investors, and the OpenAI Foundation. Before the recent funding rounds, Microsoft maintained a 32.5% stake in the for-profit entity. The revised ownership structure positions Microsoft as OpenAI’s largest individual investor while allowing the AI startup to pursue additional capital without the constraints that previously limited its fundraising capabilities.
OpenAI’s Public Benefit Corporation Restructuring
OpenAI has completed its conversion from a capped-profit limited liability company to a public benefit corporation (PBC), a corporate structure that requires balancing shareholder interests with a broader social mission. The OpenAI nonprofit foundation retains control and oversight of the for-profit OpenAI Group PBC while holding an equity stake currently valued at approximately $130 billion. This hybrid model allows OpenAI to attract significant investment while maintaining commitment to its founding mission of ensuring AGI benefits all humanity.
Independent AGI Verification Panel
A critical innovation in the new agreement establishes an independent expert panel tasked with verifying when OpenAI achieves AGI. Previously, OpenAI had sole authority to declare AGI achievement, but the new structure introduces oversight to a determination involving billions of dollars in financial consequences. The identities of panel members have not been disclosed, though the panel’s verification will trigger significant changes to intellectual property rights, revenue sharing arrangements, and the fundamental structure of the partnership.
Key Changes from the Original 2019 Agreement
The partnership that began with Microsoft’s $1 billion investment in 2019 has evolved substantially, with the 2025 agreement introducing fundamental modifications to rights, obligations, and competitive freedoms.
Extended IP Rights Through 2032
Microsoft’s intellectual property rights for both AI models and products now extend through 2032, a significant expansion that includes models developed post-AGI with appropriate safety guardrails. This represents a major shift from the original agreement, which would have terminated Microsoft’s access to OpenAI technology upon AGI declaration. However, Microsoft’s rights to “research IP” defined as confidential methods used in developing models and systems will expire either when the expert panel verifies AGI or by 2030, whichever occurs first.
Third-Party Development Flexibility
Both companies now have expanded latitude to work with external partners. OpenAI can jointly develop products with third parties, though API products created with partners must remain exclusive to Azure. Non-API products may be served on any cloud provider, loosening Microsoft’s previous stranglehold on OpenAI’s infrastructure. Microsoft, for its part, can now independently pursue AGI development alone or in partnership with other organizations, a freedom previously restricted under the exclusive partnership terms.
Azure Contract Modifications
OpenAI has committed to purchasing an additional $250 billion in Azure cloud services, a massive expansion of their infrastructure relationship. However, Microsoft no longer holds the right of first refusal to serve as OpenAI’s exclusive compute provider. This balanced arrangement ensures substantial revenue for Microsoft’s cloud division while giving OpenAI flexibility to diversify its infrastructure partnerships as computational needs scale.
How AGI Verification Will Work
The process for determining when humanity has achieved AGI represents one of the most consequential and complex aspects of the new partnership framework.
The Role of Independent Expert Panel
The expert panel will evaluate OpenAI’s claims against undefined criteria for what constitutes AGI, a term that lacks industry consensus and varies widely across technical, philosophical, and practical definitions. The panel’s composition, evaluation methodology, and decision-making threshold remain undisclosed, though their determination will be binding on both parties. This structure aims to prevent premature AGI declarations that could disrupt the partnership while ensuring legitimate breakthroughs are properly recognized.
What Happens When AGI Is Declared
Upon AGI verification by the expert panel, several major changes trigger automatically. Microsoft’s revenue-sharing agreement with OpenAI terminates, though payments will continue over an extended period. Microsoft loses access to OpenAI’s research IP, though crucially retains rights to model architecture, model weights, inference code, and data center-related intellectual property. Azure API exclusivity ends, allowing OpenAI to offer services through competing cloud providers.
Financial Implications of AGI Achievement
Previous reporting suggested Microsoft and OpenAI defined AGI financially as AI systems generating at least $100 billion in profits, though the updated agreement’s verification criteria remain confidential. With OpenAI currently projecting losses through 2028 and profitability not expected until 2029, the practical timeline for AGI declaration may extend well into the 2030s regardless of technical milestones. This financial reality ensures Microsoft’s extended access to OpenAI technology for the foreseeable future, justifying the expanded IP rights through 2032.
Microsoft’s Rights and Limitations Under New Deal
The agreement carefully balances Microsoft’s need for technology access with OpenAI’s requirements for operational independence and future flexibility.
Intellectual Property Access
Microsoft maintains exclusive IP rights and Azure API exclusivity until AGI is achieved, preserving the core technology transfer that has powered Microsoft’s AI product strategy including Copilot and Azure OpenAI Service. The extended timeline through 2032 provides long-term certainty for Microsoft’s product roadmap and competitive positioning against rivals like Google and Amazon. Importantly, post-AGI models remain accessible to Microsoft with safety guardrails, ensuring continuity even after the AGI threshold is crossed.
Research IP vs Product IP
The agreement distinguishes between different categories of intellectual property with varying termination dates. Research IP encompasses confidential development methods for internal deployment or research purposes, with Microsoft’s access expiring at AGI verification or 2030. However, research IP explicitly excludes model architecture, model weights, inference code, finetuning code, and data center hardware and software IP all of which Microsoft retains beyond the research IP cutoff. This nuanced structure protects Microsoft’s most commercially valuable assets while allowing OpenAI to reclaim proprietary research methodologies.
Consumer Hardware Exclusions
Microsoft’s IP rights now explicitly exclude OpenAI’s consumer hardware initiatives, including the rumored AI device being developed in partnership with former Apple designer Jony Ive. This carve-out acknowledges OpenAI’s ambitions to create physical products and prevents potential conflicts as OpenAI diversifies beyond pure software offerings. The hardware exclusion also reflects Microsoft’s own device strategy, avoiding overlap with Surface and Xbox product lines.
OpenAI’s New Freedoms and Commitments
The restructured agreement grants OpenAI significant operational latitude while establishing substantial commitments that benefit Microsoft.
Third-Party Partnerships Allowed
OpenAI can now co-develop products with external partners, a freedom that opens doors to collaborations with companies across industries from healthcare to finance. The requirement that API products remain Azure-exclusive ensures Microsoft captures the infrastructure revenue from these partnerships while allowing OpenAI to expand its ecosystem. This flexibility is critical for OpenAI’s strategy to embed its technology across diverse use cases and customer segments.
$250 Billion Azure Services Contract
OpenAI’s commitment to purchase $250 billion in additional Azure services represents one of the largest cloud infrastructure deals in history. The massive contract secures predictable revenue for Microsoft’s cloud division over multiple years while providing OpenAI with computational resources necessary for training increasingly large AI models. Without the right of first refusal constraint, OpenAI can supplement Azure with other providers if needed, though the $250 billion commitment ensures Azure remains the primary platform.
Government and Defense Access
OpenAI can now provide API access to U.S. government national security customers regardless of cloud provider, removing a previous limitation that tied government deployments to Azure. This provision acknowledges the strategic importance of AI for national security while giving OpenAI flexibility to meet specific government requirements that may involve classified or air-gapped environments. The government access clause positions OpenAI as a key technology supplier to defense and intelligence agencies.
Open Weight Model Releases
The agreement permits OpenAI to release open weight models that meet specified capability criteria, marking a significant policy shift. Open weight models where model parameters are publicly released enable researchers and developers to study, modify, and deploy AI systems without API dependencies. This provision balances OpenAI’s mission to broadly distribute AI benefits with Microsoft’s commercial interests by limiting open releases to models meeting safety and capability thresholds.
What This Means for the AI Industry
The Microsoft-OpenAI partnership restructuring sends ripples across the broader technology landscape, influencing competitive dynamics, enterprise adoption patterns, and the path toward advanced AI systems.
Impact on Enterprise AI Adoption
Enterprise technology buyers gain greater clarity about the long-term stability of Azure OpenAI Service and Microsoft’s AI products through 2032. The extended IP rights and Azure commitment reduce uncertainty around supply continuity, encouraging larger organizations to make substantial investments in OpenAI-powered applications. However, OpenAI’s new ability to partner with third parties may fragment the market, creating competing integration paths and potentially complicating enterprise procurement decisions.
Competition Implications
Microsoft’s competitors particularly Google, Amazon, and Anthropic now face a rival with secured access to frontier AI models for nearly a decade. The deal’s flexibility provisions create interesting strategic possibilities: Microsoft can develop AGI independently while maintaining OpenAI access, potentially hedging its AI technology strategy. Meanwhile, OpenAI can collaborate with Microsoft’s rivals on non-API products, potentially licensing technology to Google Cloud or AWS customers in ways that complicate competitive positioning.
Path to IPO
OpenAI’s conversion to a public benefit corporation removes the capped-profit structure that previously limited returns to investors, clearing a major obstacle to a potential initial public offering. The $135 billion valuation, regulatory approvals from Delaware and California attorneys general, and clarified ownership structure establish a foundation for eventual public markets access. An OpenAI IPO would rank among the largest tech offerings in history, though timing remains uncertain given profitability projections extending to 2029.
Financial Structure and Ownership Breakdown
Understanding the complex financial architecture underlying the partnership requires examining investment history, ownership distribution, and value allocation across stakeholders.
Microsoft’s Investment History
Microsoft’s journey from initial $1 billion investor in 2019 to 27% owner valued at $135 billion represents one of the most successful venture investments in technology history. The partnership evolved through three major phases: the $1 billion 2019 investment when OpenAI transitioned to a hybrid model, approximately $2 billion in additional funding around 2021, and the $10 billion mega-investment in January 2023. Microsoft’s total cash investment reportedly exceeds $13 billion, though the company has also provided billions in Azure cloud credits that count toward its ownership stake.
OpenAI Foundation’s $130 Billion Stake
The OpenAI nonprofit foundation holds equity in the for-profit entity currently valued at approximately $130 billion, nearly matching Microsoft’s $135 billion stake in absolute terms. This massive endowment positions the foundation among the world’s wealthiest charitable organizations, though the equity is illiquid until OpenAI achieves liquidity through IPO or other mechanisms. The foundation announced it will commit an initial $25 billion to advancing health and developing AI resilience technical solutions, establishing concrete philanthropic objectives.
Employee and Investor Allocations
The remaining equity is distributed among OpenAI employees, early investors including Khosla Ventures and Reid Hoffman, and newer investors from recent funding rounds that valued the company at $157 billion before the PBC restructuring. CEO Sam Altman reportedly will not hold equity in the PBC, an unusual arrangement for a founder-led company of this scale. The lack of founder equity may reflect regulatory sensitivities around OpenAI’s nonprofit origins and the need to demonstrate that the restructuring genuinely serves the mission rather than enriching insiders.
Timeline: Evolution of Microsoft-OpenAI Partnership
The partnership’s development from 2019 through 2025 reveals an increasingly intertwined relationship punctuated by moments of tension and negotiation.
2019-2023: Foundation and Growth
The relationship began in 2016 with OpenAI committing to Azure as its primary cloud provider, evolving into a formal investment partnership in 2019 when Microsoft contributed $1 billion. Microsoft exclusively licensed GPT-3 in 2020, built a supercomputer specifically for OpenAI, and launched Azure OpenAI Service to commercialize the technology. The partnership’s third phase commenced in January 2023 with Microsoft’s $10 billion investment, coinciding with ChatGPT’s explosive growth and OpenAI’s emergence as an industry leader.
2024-2025: Restructuring Phase
Tensions emerged as OpenAI’s commercial success and capital requirements conflicted with its nonprofit structure’s profit caps and Microsoft’s exclusive relationship. OpenAI began exploring restructuring options in 2024, initially proposing a full conversion to for-profit that faced backlash from stakeholders concerned about mission drift. The company pivoted to the PBC model in 2025, securing approvals from Delaware and California regulators while negotiating the revised Microsoft agreement.
2026-2032: New Agreement Period
The restructured partnership takes effect immediately and runs through 2032, providing a stable framework for the next seven years. This period will likely see continued AI capability improvements, potential AGI breakthroughs subject to expert panel verification, OpenAI’s possible IPO, and Microsoft’s integration of increasingly sophisticated AI throughout its product portfolio. The agreement’s flexibility provisions allow both companies to adapt to rapidly evolving market conditions while maintaining their core collaboration.
Comparison Table: Original vs New Microsoft-OpenAI Agreement
| Provision | Original Agreement (2019-2025) | New Agreement (2025-2032) |
|---|---|---|
| Microsoft Ownership | 32.5% (pre-funding rounds) | 27% ($135B valuation) |
| IP Rights Duration | Until AGI declaration | Through 2032, including post-AGI models |
| AGI Verification | OpenAI sole authority | Independent expert panel required |
| Third-Party Partnerships | Restricted/exclusive to Microsoft | Allowed; API products Azure-exclusive |
| Azure Exclusivity | Microsoft right of first refusal | $250B commitment, no exclusivity |
| Microsoft AGI Pursuit | Restricted by exclusivity | Can pursue independently or with partners |
| Consumer Hardware | Included in IP rights | Explicitly excluded from Microsoft rights |
| Revenue Sharing | Until AGI | Until expert panel verifies AGI |
| Research IP Access | Until AGI | Until AGI verification or 2030 |
| Government Customers | Azure-dependent | Can use any cloud provider |
| Open Weight Models | Not specified | Allowed with capability criteria |
| Corporate Structure | Capped-profit LLC | Public Benefit Corporation |
Common Questions About the Partnership
What percentage of OpenAI does Microsoft own?
Microsoft holds approximately 27% of OpenAI Group PBC on an as-converted diluted basis, valued at roughly $135 billion. This represents a decrease from the 32.5% stake Microsoft held before recent funding rounds, though the absolute value increased substantially.
When will OpenAI achieve AGI?
The timeline for achieving artificial general intelligence remains highly uncertain and depends on technical breakthroughs, resource availability, and how AGI is ultimately defined. Previous financial definitions suggested AGI required AI systems generating $100 billion in profits, which may not occur until the 2030s given current loss projections.
What happens to Microsoft’s rights when AGI is achieved?
Upon AGI verification by an independent expert panel, Microsoft’s revenue-sharing agreement ends and research IP rights expire, though crucially Microsoft retains access to OpenAI models and products through 2032 including post-AGI models. Azure API exclusivity also terminates at AGI declaration.
Can OpenAI work with Microsoft competitors now?
Yes, OpenAI can now jointly develop products with third parties, though API products must remain exclusive to Azure. Non-API products can be served on any cloud provider, allowing potential collaborations with Google, Amazon, or other technology companies.
How much did Microsoft invest in OpenAI total?
Microsoft has invested more than $13 billion in cash and cloud computing credits since 2019, including a $1 billion initial investment, approximately $2 billion in 2021, and $10 billion in 2023.
What is a public benefit corporation?
A public benefit corporation is a for-profit corporate structure that legally requires directors to balance shareholder financial interests with a broader social mission defined in the company’s charter. PBCs face less restrictive profit limitations than nonprofits while maintaining accountability to stated public benefits.
Does the OpenAI nonprofit still exist?
Yes, the OpenAI Foundation nonprofit continues to exist and retains control and oversight of the OpenAI Group PBC while holding an equity stake valued at approximately $130 billion.
Can Microsoft develop its own AGI now?
Yes, the revised agreement explicitly permits Microsoft to independently pursue AGI development alone or in partnership with third parties. If Microsoft uses OpenAI IP to develop AGI before AGI is declared, the models will face compute thresholds significantly larger than current leading models.
What is the $250 billion Azure commitment?
OpenAI has contracted to purchase an additional $250 billion in Azure cloud computing services from Microsoft, one of the largest infrastructure deals in technology history. This commitment ensures Azure remains OpenAI’s primary compute provider despite Microsoft losing its right of first refusal.
Will OpenAI go public?
OpenAI’s restructuring to a public benefit corporation removes major obstacles to an eventual initial public offering, though no timeline has been announced. The $135 billion valuation and regulatory approvals establish a foundation for public markets access when OpenAI decides to pursue that path.
Frequently Asked Questions (FAQs)
Why did OpenAI restructure to a public benefit corporation?
OpenAI restructured to a PBC to remove the capped-profit limitations that restricted fundraising capabilities while maintaining legal accountability to its mission of ensuring AGI benefits humanity. The structure allows OpenAI to attract billions in additional investment necessary for increasingly expensive AI development.
Who decides when AGI is achieved?
An independent expert panel will verify whether OpenAI has achieved artificial general intelligence, replacing the previous arrangement where OpenAI had sole authority to declare AGI. The panel’s composition and evaluation criteria have not been publicly disclosed.
Does Microsoft still have exclusive rights to OpenAI technology?
Microsoft maintains exclusive IP rights and Azure API exclusivity until AGI is achieved, though the new agreement allows OpenAI to develop certain products with third parties. Microsoft’s exclusive rights extend through 2032 for models and products.
What does the $250 billion Azure deal mean?
OpenAI committed to purchasing an additional $250 billion in Azure cloud services, ensuring Microsoft remains the primary infrastructure provider despite losing right of first refusal to be OpenAI’s exclusive compute source.
Can Microsoft develop AI competing with OpenAI?
Yes, the revised agreement explicitly allows Microsoft to independently pursue AGI development alone or with other partners, though models developed using OpenAI IP before AGI declaration face compute thresholds.
What is research IP in the Microsoft-OpenAI agreement?
Research IP refers to confidential methods used in developing AI models and systems, intended for internal deployment or research purposes. Microsoft’s research IP rights expire when AGI is verified or by 2030, but exclude more valuable commercial assets like model weights and inference code.
Who owns the OpenAI nonprofit foundation?
The OpenAI Foundation operates as a nonprofit organization controlled by its board of directors, with no individual owners. The foundation holds an equity stake in OpenAI Group PBC currently valued at approximately $130 billion.
Will Sam Altman own equity in the new OpenAI structure?
Reports indicate CEO Sam Altman will not hold an equity stake in the OpenAI Group PBC, an unusual arrangement for a founder-led company of this scale.
What are the safety guardrails for post-AGI models?
The agreement mentions “appropriate safety guardrails” for Microsoft’s access to post-AGI models but does not publicly specify the technical or policy requirements these guardrails will impose.
When might OpenAI go public?
No IPO timeline has been announced, though the PBC restructuring, regulatory approvals, and clarified ownership structure establish prerequisites for eventual public offering. OpenAI’s profitability projections suggest an IPO may not occur until after 2029.
Featured Snippet Boxes
What is the new Microsoft-OpenAI partnership agreement?
Microsoft and OpenAI signed a new partnership agreement in October 2025 that values Microsoft’s investment at $135 billion (27% stake), extends Microsoft’s IP rights through 2032, supports OpenAI’s conversion to a public benefit corporation, and establishes an independent expert panel to verify AGI achievement.
How much of OpenAI does Microsoft own?
Microsoft owns approximately 27% of OpenAI Group PBC on an as-converted diluted basis, with an investment valued at roughly $135 billion following OpenAI’s restructuring and recapitalization.
What happens when OpenAI achieves AGI?
When an independent expert panel verifies OpenAI has achieved AGI, Microsoft’s revenue-sharing agreement terminates and research IP rights expire, though Microsoft retains access to models and products through 2032 including post-AGI systems.
Can OpenAI partner with other companies besides Microsoft?
Yes. Under the new agreement OpenAI can jointly develop products with third parties, though API products must remain Azure-exclusive while non-API products can use any cloud provider.
What is OpenAI’s public benefit corporation structure?
OpenAI converted its for-profit entity to a public benefit corporation (PBC), a corporate structure requiring directors to balance shareholder financial returns with OpenAI’s mission to ensure AGI benefits all humanity.
How much has Microsoft invested in OpenAI?
Microsoft has invested more than $13 billion in OpenAI since 2019, including a $1 billion initial investment, approximately $2 billion in 2021, and $10 billion in January 2023.
Source: OpenAI | Microsoft Blog
