Microsoft OpenAI AI Revenue Circular

by Huda Thomas: Microsoft

Microsoft is deceiving investors by inflating its AI empire with money it handed to OpenAI. The company sold Wall Street a $37 billion AI business, yet the origin of that figure hides in plain sight within its fiscal 2026 annual report. The filing states Microsoft recorded $24.1 billion of revenue from commercial arrangements with OpenAI, a sum that includes revenue sharing payments. When you break down Microsoft's own disclosures, OpenAI makes up more than half, and likely around 70%, of everything the tech giant counts as AI sales. That is ONE customer. A Microsoft spokesperson confirmed the $24.1 billion figure covers all sales and revenue share from OpenAI. The 70% estimate assumes Microsoft's AI run rate kept growing at the 123% pace the company reported in March, applying the firm's own optimistic math against itself. Follow the money trail to see how this works. Microsoft has put around $12 billion into OpenAI since 2019. OpenAI spends that cash on computing power, and Microsoft is the cloud provider selling it. So the capital leaves as an investment and returns as an Azure bill. Microsoft then books that bill as AI revenue, presenting it to investors as proof that the AI business is working. The cycle looks like this: Microsoft invests in OpenAI, OpenAI buys Microsoft compute, and Microsoft records the payment as AI revenue before sending the growth story to Wall Street. And a chunk of it never actually arrived. The same filing shows $6 billion of accounts receivable from OpenAI as of June 30. That represents $6 billion of AI revenue Microsoft booked but had not been paid when the year closed. Now here's where it gets really concerning for anyone holding the stock. Microsoft has told the public the size of its total AI business exactly twice. First, for the quarter ending December 2024, the company said the unit was on pace for more than $13 billion a year. Second, for the quarter ending March 2026, Satya Nadella stated the AI unit was on pace for $37 billion. That $37 billion number went everywhere. It served as headline proof that Microsoft had won the AI race. Then fourth quarter earnings arrived, and Microsoft did not update the figure. The company that had been announcing the number as its own scoreboard stopped announcing it. In the same stretch, the filing landed showing where most of the revenue came from. So what is actually left underneath? The full year AI business ran near $34 billion. Taking OpenAI out of the calculation leaves roughly $10 billion remaining for the rest of the AI business. Consider the scale of the bet: Microsoft has spent about $261 billion on capital expenditure since the start of 2022. That is the investment level against what the rest of the AI business currently brings in. And the one customer holding it up is walking further away every quarter. In October, Microsoft's stake in OpenAI dropped to 27% from 32.5%. In April, the partnership was rewritten so OpenAI can sell its products across any cloud it likes. This change is how Amazon got a seat at the table. The exclusivity that made this arrangement valuable is gone. The compute bill and the unpaid $6 billion are still on Microsoft's books. Nadella spent two years telling the market Microsoft built the largest AI business in software. The filing shows one client bought most of it, on credit, using money Microsoft partly supplied. So watch the next earnings call. If Microsoft puts a fresh total AI number back on the board, the business has found customers beyond OpenAI. If you hear a lot about AI momentum and never hear what it adds up to, you already know why the number went missing. But nonetheless, how is something like this even legal? The speaker in the attached video holds a 30% stake in OpenAI and notes that OpenAI has promised to spend hundreds of billions of dollars. They make tens of billions of dollars, and OpenAI will make $25 billion this year in revenue. The speaker argues the math does not add up and predicts a moment of truth. They view AI as a new general purpose technology that will drive productivity. That productivity must translate into broad-spread economic growth and economy-wide GDP growth. Without broad economic growth, there will be a problem. The real benefits of this technology must be seen by every firm in the economy, whether small business, large multinational, or public sector institution.