Microsoft and OpenAI Partnership Update 2025

Microsoft and OpenAI have entered a new phase of their partnership through a definitive agreement that transitions OpenAI into a public benefit corporation (PBC) and updates the terms of their intellectual property and compute arrangements. This agreement ensures that OpenAI remains Microsoft's frontier model partner while providing both organizations with greater independence to pursue innovation and growth.

Corporate Structure and Investment

OpenAI is transitioning to a public benefit corporation (PBC) and undergoing recapitalization. Following this process, Microsoft holds an investment in OpenAI Group PBC valued at approximately $135 billion, representing roughly 27 percent on an as-converted diluted basis across all owners, including employees, investors, and the OpenAI Foundation. Prior to recent funding rounds, Microsoft's stake in the OpenAI for-profit entity was 32.5 percent on an as-converted basis.

AGI Verification and IP Rights

The new agreement refines how Artificial General Intelligence (AGI) is handled and the IP rights associated with it.

AGI Declaration

Once OpenAI declares AGI, the declaration must now be verified by an independent expert panel. This replaces previous mechanisms for determining when AGI has been reached.

Intellectual Property Extensions

Microsoft's IP rights for models and products are extended through 2032 and now include models developed post-AGI, provided appropriate safety guardrails are in place.

Research IP—defined as the confidential methods used in the development of models and systems, including models intended for internal deployment or research only—is granted to Microsoft until the expert panel verifies AGI or until 2030, whichever occurs first.

Microsoft retains non-Research IP rights, which include:

  • Model architecture
  • Model weights
  • Inference code
  • Finetuning code
  • IP related to data center hardware and software

Notably, Microsoft's IP rights now explicitly exclude OpenAI's consumer hardware.

Product Development and Cloud Exclusivity

The agreement updates the rules regarding how OpenAI and Microsoft can develop products and collaborate with third parties.

Third-Party Collaboration

OpenAI may now jointly develop certain products with third parties. While API products developed with third parties must remain exclusive to Azure, non-API products may be served on any cloud provider.

Compute and Azure Services

OpenAI has contracted to purchase an additional $250 billion in Azure services. However, Microsoft no longer holds a right of first refusal to be OpenAI's compute provider.

Government and Open Source

OpenAI is now permitted to provide API access to US government national security customers regardless of the cloud provider used. Additionally, OpenAI may now release open weight models, provided they meet specific capability criteria.

Strategic Independence

Both companies have gained more autonomy in their pursuit of AGI.

  • Microsoft's Path to AGI: Microsoft can now independently pursue AGI, either alone or in partnership with third parties.
  • AGI Development Thresholds: If Microsoft uses OpenAI's IP to develop AGI before AGI is declared, the resulting models will be subject to compute thresholds that are significantly larger than the size of systems used to train leading models today.
  • Revenue Share: The revenue share agreement remains in effect until the expert panel verifies AGI, although the payment period for these payments will be extended.

Sources