OpenAI and Microsoft's alliance fractures as cloud exclusivity deal ends — Azure's single-provider monopoly for ChatGPT is officially over

Microsoft and OpenAI have once again renegotiated the terms of their deal with one another, but it might be what's best for both of them. OpenAI and Microsoft have announced an end to their exclusive arrangement, and a re-jigging of how they handle model oversight, revenue sharing, and cloud deployments. Microsoft will no longer pay OpenAI for what it makes from Copilot, but OpenAI no longer has to exclusively use Azure servers for ChatGPT, opening it up for further deals with other cloud service providers.

What this means for the ever-nebulous AGI clause that both companies were so keen to retain access to and control over, if and when it materializes, remains to be seen. It's an intriguing move that leaves the immediate future of both companies' AI efforts uncertain, but perhaps it's better than Microsoft's legal department firing all barrels at OpenAI over its recent deal with Amazon.

Where's the ROI?

One of the biggest questions of the AI industry over the past year and a half has been the source of profit. Not the infrastructure investment, or the circular deals and token IOUs, but the real profit. For the investors who pumped tens of billions of dollars into OpenAI, Anthropic, and xAI, and for the shareholders who ballooned Microsoft, Google, and Meta's stock prices off the back of these mega deals and unprecedented investment plans.

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Microsoft CEO Satya Nadella hinted at this in January, when he said at the World Economic Forum that AI companies needed to find a clear use for the technology or risk losing the "social permission" to continue the work.

That seems to be more of a pressing issue for Microsoft by April, when it announced that Copilot use on GitHub would move to token-based billing — that is, charging users for the amount of tokens they use, rather than on a per-request basis. No longer would shorter requests with shorter responses cost as much as longer, more in-depth queries. From June, this will result in users paying more when Copilot is verbose in its responses, or when it has to analyze more data before making its suggestions.

Microsoft is already doing that with Azure agents, and it's also set to raise the price of Microsoft 365 with its Copilot integration by several dollars a month for most tiers.

According to internal documents reportedly shared with journalist Ed Z itron, this move came because Microsoft had faced a more-than-doubling of its Copilot-related costs from January this year. He also claims Microsoft will take further steps to tighten controls and increase earnings from individual AI users, including reducing rate limits and forcing users onto different models, which could more than double costs.

Things aren't much better at OpenAI, either. It was projected in January to be on track to run out of money entirely by the end of 2027, and despite announcements of enormous investments in the company, it's projected to burn through tens of billions over the coming years. All while somehow planning to turn a profit by the end of the decade, but to manage that, it would need to earn hundreds of billions of dollars a year. OpenAI's annualized revenue run rate is reportedly sitting at roughly $2 billion per month, or $24 billion a year.

OpenAI also performed several major pivots and navigational shifts in recent months. We learned about its chip manufacturing ambitions in February, it announced it was building a GitHub competitor in March, the company warned that it would shutter the Sora text-to-video generation tool in April, and it bought a podcast for over $100 million that same month.

Even OpenAI's own financial officer has said she doesn't see how OpenAI can afford its own promised infrastructure spending, as it misses key revenue targets in 2026, according to a new WSJ report.

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It's very hard to see how any of this takes OpenAI from a heavy-loss-making company to one that's incredibly profitable in just a few years.

Don't drop the bag

OpenAI was under pressure in 2025. To secure the promised investment of billions from Japanese investment firm Softbank, it needed to convert to a for-profit company and settle its disagreements with Microsoft. It managed that just in time, finally securing a long-term partnership agreement with Microsoft in the Fall. The Softbank money came rolling in, and just a few months later, the deal was renegotiated again.

But rejigging the deal may be OpenAI's way of securing the next round of funding — the $50 billion promised investment from Amazon in February, which Microsoft was none-too-pleased about. But in doing so, it's lost one of its limited revenue streams from Microsoft's Copilot earnings, and will still have to pay Microsoft 20% of its own limited earnings.

That Amazon investment could come alongside another $60 billion from Nvidia and SoftBank (though not the $100 billion Jensen originally promised), if all goes to plan. That would also value the company at around $730 billion, making a potential IPO incredibly profitable for Altman and anyone else holding OpenAI shares at the time of a public offering.

But even with OpenAI more than halving its compute ambitions from $1.4 trillion in expenditure to $600 billion by 2030, that's still contingent on increasing its own revenue to $280 billion a year by that same date. As of the time of writing, OpenAI hasn't even managed to earn 10% of that, while having close to a billion active users (though crucially, it also missed that milestone by the end of 2025), and it is losing mindshare to competitors like Anthropic.

Regardless, OpenAI seems keen to push forward with its IPO plans. At this stage, that may be the only real avenue left for it to get anywhere close to its ambit ious goals. Even with shifting goalposts, the timeline for its profitability is shrinking rapidly, and it still hasn't made a clear path toward it.