Evercore ISI analyst Kirk Materne on Monday offered an assessment of the updated commercial agreement between Microsoft and OpenAI, describing the changes as a simplification of the relationship that grants both parties additional flexibility.
Under the revised terms, Microsoft will stop paying a revenue share on OpenAI products that Microsoft resells through its cloud platform. Microsoft also relinquished its exclusive right to be the sole seller of OpenAI's AI models.
Materne said the new structure swaps some exclusivity for clearer economics and operational latitude. From Microsoft's perspective, the arrangement provides greater clarity, flexibility and economic certainty, while OpenAI obtains wider market access for its products.
Key legal and commercial milestones were also clarified in the new contract language, according to the analyst. Language linking commercial terms to AGI-related triggers appears to have been removed from the framework. The agreement now sets out defined cutoff dates for intellectual property access through 2032 and constrains revenue share economics through 2030 with a cap.
"We do not believe this revised agreement should come as a major surprise to investors at this point, as Microsoft has increasingly signaled interest in a broader multi model strategy, while OpenAI has clear incentives to expand distribution more broadly across the market," Materne said.
Under the amended terms, OpenAI is permitted to serve its products on any cloud provider, meaning Azure is no longer the exclusive avenue for distribution and deployment. Microsoft retains a license to use OpenAI intellectual property through 2032, but that license is now non-exclusive.
On the financial side of the deal, Microsoft will cease remitting revenue share to OpenAI for products it resells on its cloud. Conversely, OpenAI's revenue share payments to Microsoft will continue at the same percentage through 2030, though those payments are now subject to a cap.
Materne observed that the document's removal of AGI terminology and AGI-triggered clauses should reduce an element of prior investor uncertainty. Despite the reduced exclusivity, Materne noted Microsoft remains the anchor commercial and infrastructure partner in the relationship and retains long-term access to OpenAI technology as part of the revised agreement.
Evercore ISI continues to hold an Outperform rating on Microsoft shares and has a $580 price target on the stock.
Summary
The updated Microsoft-OpenAI deal streamlines how the companies will work together commercially. Microsoft gives up exclusivity and the obligation to pay revenue share on OpenAI products it resells on the cloud, while OpenAI can distribute across multiple cloud providers and will continue revenue share payments to Microsoft through 2030 with a cap. The agreement preserves Microsoft's strategic role and a non-exclusive IP license through 2032, and removes AGI-linked language from the commercial framework.
Key points
- Microsoft will no longer pay revenue share on OpenAI products it resells on its cloud - impacts cloud infrastructure and software distribution models.
- OpenAI gains the right to deliver products across any cloud provider, broadening market distribution - impacts cloud services and SaaS deployment strategies.
- Contract clarifications include IP access through 2032 and capped revenue-share economics through 2030; Microsoft retains a preferred strategic role despite reduced exclusivity.
Risks and uncertainties
- Removal of exclusivity changes competitive dynamics in cloud infrastructure and AI platform markets, potentially affecting Azure's competitive positioning.
- Cap on revenue-sharing and the cessation of Microsoft payments for resold OpenAI products could alter revenue flows for both cloud services and AI product monetization strategies.
- Elimination of AGI-linked commercial triggers reduces one source of prior investor uncertainty, but leaves open how future technological developments might affect commercial terms beyond 2030-2032.