-- Microsoft (MSFT) and OpenAI have amended their partnership under which the technology giant will no longer pay a revenue share to the ChatGPT maker, among other things, with Wedbush Securities calling the development a net positive for Microsoft.
Under the amended partnership, revenue share payments from OpenAI to Microsoft will continue through 2030, independent of the artificial intelligence firm's "technology progress, at the same percentage, but subject to a total cap," the companies said Monday. Microsoft will continue to have a license to OpenAI intellectual property for models and products through 2032, while its license will now be nonexclusive, according to a joint statement.
"We view this as a net positive for Microsoft, as the company locks in a six-year IP control over OpenAI technology and maintains a significant share of OpenAI while ending the back-and-forth between Redmond and OpenAI and setting the stage for Microsoft to get all revenue generation on its core platform," Wedbush analysts, including Dan Ives, said in a note to clients.
Microsoft will remain the primary cloud partner of OpenAI. The AI firm's products will ship first on Microsoft Azure, unless the tech giant "cannot and chooses not to support the necessary capabilities," the companies said. OpenAI will now be able to serve all its products to customers "across any cloud provider," they added.
"The greater predictability in the amended agreement strengthens our joint ability to build and operate AI platforms at scale while providing both companies the flexibility to pursue new opportunities," Microsoft and OpenAI said.
The amended partnership puts OpenAI on "a strong path forward to going public" via an initial public offering given its "clearer opportunity in the cloud environment while reducing significant barriers" from its original Microsoft partnership, the Wedbush analysts said.
"In essence, the training wheels are off for (Microsoft) with OpenAI and now it's about a step-up in AI monetization on its core platform looking forward," the analysts wrote.
Microsoft is scheduled to report its fiscal third-quarter financial results Wednesday.
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