Microsoft and OpenAI are each other's biggest customer. That can't last.
Microsoft booked $24.1 billion in AI revenue from OpenAI, about 70% of its AI business, and OpenAI commitments make up about 45% of its cloud backlog. That concentration is why Microsoft capped the deal, invested in Anthropic and built Copilot Cowork.
TLDR: The AI circular economy is not sustainable. A few key points:
- Microsoft was OpenAI/ChatGPT’s biggest customer at 70% of their business.
- OpenAI/ChatGPT was Microsoft’s biggest customer at 45% of their revenue for Azure/cloud.
This is why Microsoft has introduced CoPilot Cowork, which is an alignment with Anthropic/Claude. They realized not only is Cowork a better product than ChatGPT work, but they need to bet on more horses in this race.
Here are the finer details
Microsoft booked $24.1 billion in AI revenue from OpenAI for the fiscal year ending in June. Bloomberg puts that at roughly 70% of Microsoft’s entire AI business.
Part of that money started at Microsoft. It invested in OpenAI, OpenAI bought Azure compute, and Microsoft recorded the spend as AI revenue. Every dollar is real and disclosed. It is still one customer. OpenAI related commitments also make up about 45% of Microsoft’s $625 billion cloud backlog.
Microsoft has been unwinding the dependency for months. In April it capped OpenAI’s revenue share at $38 billion, gave up exclusivity, and put money into Anthropic. That is concentration risk being managed in public.
Throw NVIDIA into the mix and the players increase as well as the complexity. However, NVIDIA is more diversified in their investments and customer base.