Microsoft and OpenAI unveil a deal extending IP rights, adding independent AGI verification, and giving both sides more freedom while maintaining Azure ties.

Microsoft emerges as the winner with significant concessions that make its original OpenAI investment well worthwhile.

Since 2019, Microsoft and OpenAI have shared a vision to advance artificial intelligence responsibly and make its benefits broadly accessible. What began as an investment in a research organization has grown into one of the most successful partnerships in our industry.

However, Microsoft revealed a major drop in profit due to what it termed was an “equity method investment” in OpenAI Group PBC, resulting in a 41-cents-per-share hit to its earnings and a $3.1 billion drop in its net income. Even so, the company’s bottom line was still healthy at $27.7 billion, up from $24.67 billion in the year-ago quarter.

With a new OpenAI partnership in hand, Microsoft is going into its earnings report Wednesday afternoon with a resolution to one of the biggest questions about its business.

Microsoft and OpenAI reached a deal to allow the ChatGPT maker to restructure itself into a public benefit corporation, valuing OpenAI at $500 billion and giving it more freedom in its business operations.

Microsoft lifted a funding restriction on OpenAI that became a point of conflict after ChatGPT took off required more computing power.

OpenAI said Tuesday it has reorganized its ownership structure and converted its business into a public benefit corporation after two crucial regulators, the Delaware and California attorneys general, said they would not oppose the plan.