Microsoft’s latest quarterly filing with the U.S. Securities and Exchange Commission (SEC) revealed a significant decline in profits, as the company reported a $3.1 billion net income loss in Q1 FY2026 tied to its investment in OpenAI. This marks a sharp increase from the $523 million loss recorded during the same quarter last year, signaling the growing financial impact of its multibillion-dollar AI partnership. The decline also reduced Microsoft’s diluted earnings per share (EPS) by $0.41, compared to a $0.07 drop in the prior year.
Microsoft has committed $13 billion to OpenAI and has already disbursed $11.6 billion of that amount. With its 27% ownership stake, the tech giant’s reported losses suggest that OpenAI’s total quarterly loss could be around $11.5 billion — a figure that has sparked concern and debate across the tech and investment communities.
The filing also sheds light on the evolving structure of OpenAI following its transition into a Public Benefit Corporation (PBC) earlier this year. Microsoft’s stake now represents a 27% share in OpenAI Group PBC, which is valued at approximately $135 billion. This restructuring was intended to align OpenAI’s mission of developing safe and beneficial artificial general intelligence (AGI) with a sustainable business model.
Despite the shift, Microsoft’s strategic relationship with OpenAI remains firmly intact. The company will continue as OpenAI’s exclusive cloud provider, supplying the compute power needed to train and deploy its advanced models. Additionally, Microsoft will retain intellectual property rights for OpenAI’s models and products until at least 2032, including post-AGI systems — subject to safety and verification protocols governed by an independent oversight panel.
While the short-term losses underscore the volatility of AI investments, analysts note that Microsoft’s long-term bet on OpenAI could secure its leadership in the next wave of enterprise AI and cloud infrastructure. The partnership has already fueled AI integration across Microsoft products such as Copilot, Azure AI, and GitHub, positioning the company at the forefront of AI-driven enterprise transformation — even as it bears the cost of powering the technology’s rapid evolution.
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