Companies have a lot of tools at their disposal to hide things on their balance sheet for a while. However when that happens it typically means the numbers are bad. Really bad. If they weren’t, they’d do everything they can to highlight how great the investment is going.
Same reason why seemingly every CEO on the planet is making hand wavy statements about how their company is leading with AI and it will revolutionize their industry, and yet almost nobody is willing to break out this amazing stuff in their P&L. Funny how that works.
This is a silly article. Since MSFT took a ~49% stake in OpenAI, it records its share of OpenAI's net losses in the other income line under the equity method of accounting. MSFT is offsetting its taxable income based on a prior investment
Does Microsoft even have an OpenAI stake? Their original more public deal was revenue sharing up until they reached 100x $1 billion. That doesn't sound like a stake.
They also had tech sharing valid until the OpenAI board declares 'AGI'.
That seems like a really bad deal. And that was probably at the time when Microsoft had the most leverage to make a deal. Their subsequent deals would make sense to be worse.
The most valuable thing MS gets from its OpenAI dealings is that they can incorporate its AI in all their products. If you look at it as a defensive move to protect the value of Office, Windows, etc. from an AI focused competitor it's worth absorbing the losses. But try showing that on a balance sheet!
Plus, of course, if OpenAI makes money, that's also good for them.
We should be more worried about OpenAI forever twisting the word "Open" the same way as the "Democratic"/"Republic" in the names of countries like North Korea etc.
I always had a critical eye on the huge missteps that Microsoft had especially when it came to acquisitions like Danger, Nokia, whatever the ad network they bought and wrote down, etc.
And then I listened to an Acquired podcast about Microsoft when they interviewed Ballmer as part of the research. He said “At the end of the day, it was only money”. In other words, Microsoft was throwing off so much money from their profitable businesses, they could afford to lose money and take risks without it having any meaningful impact on the company.
The deal with OpenAI is really a nothingburger as far as cash. They aren’t spending any. They are giving OpenAI Azure credits and in return have a huge upside potential.
Microsoft needs to open up more about its OpenAI dealings
(wsj.com)265 points by zerosizedweasle 27 October 2025 | 178 comments
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Same reason why seemingly every CEO on the planet is making hand wavy statements about how their company is leading with AI and it will revolutionize their industry, and yet almost nobody is willing to break out this amazing stuff in their P&L. Funny how that works.
They also had tech sharing valid until the OpenAI board declares 'AGI'.
That seems like a really bad deal. And that was probably at the time when Microsoft had the most leverage to make a deal. Their subsequent deals would make sense to be worse.
Plus, of course, if OpenAI makes money, that's also good for them.
https://www.cnbc.com/2025/10/23/trump-white-house-east-wing-...
Expect lots of hand wavy “non-GAAP” numbers pushed by leadership trying to gloss over their failed AI investments.
That’s earnings call speak for “If you ignore the pile of your money we lost with bad AI investment decisions, we’ve had a good quarter. Moving on…”
https://assets.msn.com/content/view/v2/Detail/en-in/AA1Pg1O4...
And then I listened to an Acquired podcast about Microsoft when they interviewed Ballmer as part of the research. He said “At the end of the day, it was only money”. In other words, Microsoft was throwing off so much money from their profitable businesses, they could afford to lose money and take risks without it having any meaningful impact on the company.
The deal with OpenAI is really a nothingburger as far as cash. They aren’t spending any. They are giving OpenAI Azure credits and in return have a huge upside potential.
"They just write it off."
"Write it off what?"
"Jerry, all these big companies, they write off everything."
Megacorps control so much of them that the financial side has so little volatility.