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Today's Bonus Story
Why OpenAI’s IPO Plans Could Be a Massive Win for MicrosoftAuthored by Chris Markoch. Published: 5/13/2026. 
Key Points
- Microsoft’s OpenAI stake could now be worth roughly $228 billion following OpenAI’s latest funding round and restructuring.
- OpenAI’s long-term Azure commitment may provide Microsoft with a major recurring AI revenue stream through 2030.
- Investors may be undervaluing Microsoft stock by overlooking the embedded value of its OpenAI ownership stake.
- Special Report: Elon’s “Hidden” Company
OpenAI has been in the news for several reasons, most of them centered on its plans to go public. The company is pursuing an initial public offering (IPO) that could value it at around $1 trillion. That has prompted Elon Musk to take OpenAI to court on the grounds that the company, of which Musk was a co-founder, has betrayed its mission by moving from a nonprofit to a for-profit structure. Lost in all that noise is the news that OpenAI and Microsoft Corp. (NASDAQ: MSFT) have reframed their partnership. Microsoft will remain OpenAI’s primary partner, but OpenAI can now scale across multiple cloud platforms.
Microsoft also retains a license to OpenAI’s models and products through 2032. However, that license is now non-exclusive as well. For its part, OpenAI has committed to purchasing $250 billion in Azure compute services, and revenue-share payments from OpenAI to Microsoft will continue through 2030, subject to a total cap. With MSFT down over 15% in 2026 and investors questioning the company’s artificial intelligence (AI) infrastructure ambitions, it’s fair to wonder: What’s in it for Microsoft? The answer is not found in technology, but in a more boring place—Microsoft’s balance sheet. A $13 Billion Bet That Keeps Paying OffMicrosoft invested approximately $13 billion in OpenAI between 2019 and 2023. Management targeted a $92 billion return on that investment. As it turns out, that estimate was far too conservative. In October 2025, OpenAI completed its reorganization as a for-profit entity. In doing so, Microsoft’s economic interest in OpenAI was pegged at 26.79% on a fully diluted, as-converted basis. The restructuring represented a clean accounting event for Microsoft. In the nine months ending March 31, 2026, Microsoft recorded $5.9 billion in net gains from its OpenAI investment—a sharp reversal from $2.7 billion in net losses during the same period a year earlier. The losses reflected how Microsoft accounts for its OpenAI stake: under equity-method accounting, Microsoft recognizes its proportional share of OpenAI's actual operating results. Since OpenAI has been burning through cash at a significant rate, Microsoft was absorbing its share of those losses directly on its income statement. The swing to a gain wasn't from OpenAI suddenly turning profitable—it came from a one-time event. When OpenAI restructured into a Public Benefit Corporation in October 2025, it triggered a dilution gain for Microsoft: Microsoft ended up owning a smaller percentage of OpenAI, but the implied valuation of the company rose so much faster than ownership fell that Microsoft could book the difference as income. The Largest Private Funding Round in HistoryOn Feb. 27, 2026, OpenAI raised $110 billion at a $730 billion pre-money valuation—the largest private funding round in history. A month later, it expanded that round to $122 billion, closing at a post-money valuation of $852 billion. At that valuation, Microsoft's 26.79% stake is worth $228.3 billion, which is a 17.6x return on its $13 billion investment. No other large investor comes close to that level of return. More importantly, after the lock-up period following an IPO, Microsoft could sell all or part of that equity without violating any obligations to OpenAI. Critically, an IPO would not terminate the partnership. The commercial agreements, including the Azure commitment and IP licensing, run on their own contractual track through 2030 and 2032, respectively, independent of any change in OpenAI's public or private status. How Microsoft Could Deploy the ProceedsThat leads to another question. Is Microsoft planning to deploy that cash? This is speculation, but it’s speculation worth considering. To begin with, Microsoft doesn’t need the cash. However, it’s committed to an annualized AI capital expenditure (CapEx) run rate of about $190 billion. In the first half of fiscal 2026 alone, Microsoft spent more on CapEx than in all of fiscal year 2025. Any large liquidity event would almost certainly flow toward accelerating this buildout, particularly given that demand is outrunning supply. CFO Amy Hood has acknowledged that the company expects to remain capacity constrained through 2026, with next quarter's CapEx alone projected to exceed $40 billion. A staged sell-down of OpenAI equity post-IPO (i.e., selling in tranches rather than all at once) would give Microsoft a market-friendly way to fund that buildout without issuing debt or pressuring its own stock. The Valuation Case for MSFTMore important for MSFT shareholders is what this accounting event may mean for the company's valuation. As of May 12, Microsoft is trading around $408, putting its market cap at $3.03 trillion. However, the stock is still well below its 52-week high of $555.45. That means Microsoft's $228 billion OpenAI stake represents about 8% of its entire market cap. Put another way, investors are getting the core Microsoft business—Azure, Office 365, LinkedIn, Dynamics, GitHub—at a valuation near a multi-year low on operating earnings metrics, while the $228 billion OpenAI position effectively rides along at no incremental cost. Meanwhile, OpenAI's Azure consumption is recognized as revenue within Microsoft's AI business line, which is now running at a $37 billion annual rate, up 123% year over year. Even if Microsoft never sells a single share of OpenAI, the $250 billion Azure commitment alone represents a locked-in revenue stream that will compound through the end of the decade. |
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