OpenAI’s IPO aspirations prompt rethink of Microsoft alliance

Microsoft and OpenAI are renegotiating their multibillion-dollar partnership deal to better align with each company’s evolving goals in the artificial intelligence race, the Financial Times reported.

The talks center on a critical balancing act. OpenAI wants to set the stage for a potential IPO by restructuring into a more traditional for-profit entity. Microsoft aims to secure long-term access to OpenAI’s technology beyond their current contract’s 2030 expiration date.

“A critical issue in the deliberations is how much equity in the restructured group Microsoft will receive in exchange for the more than $13 billion it has invested in OpenAI to date,” according to the FT report.

The companies are at a crossroads. What started as a straightforward funding relationship in 2019 has grown more complex as OpenAI’s ambitions have expanded.

“Microsoft’s interests go beyond equity — it’s about return on investment, sustained AI infrastructure growth, and maintaining Copilot’s edge by anchoring it on OpenAI models,” said Neil Shah, VP for research and partner at Counterpoint Research. “Microsoft would like to continue having a big slice of it, being one of the key initial supporters and investors.”

What’s in it for Microsoft?

Microsoft is reportedly willing to give up some equity in OpenAI’s restructured business. In exchange, it wants guaranteed access to OpenAI’s future AI models – even those developed after their current contract ends in 2030.

“If Microsoft trades equity for extended model access, it’s signaling a pragmatic pivot from ownership to operational leverage,” said Abhivyakti Sengar, practice director at Everest Group. “This would give Microsoft continued dominance across enterprise applications without the burden of influencing OpenAI’s increasingly complex governance structure, especially if OpenAI transitions to a Public Benefit Corporation.”

The Redmond-based tech giant has already integrated OpenAI’s technology across its product lineup, from Bing search to Office applications. This integration strategy has helped Microsoft position itself as an AI leader despite arriving relatively late to the generative AI boom.

“This renegotiated partnership will further help Microsoft enhance Azure’s AI capabilities by prioritizing technological access over equity, providing financial flexibility for OpenAI to expand its enterprise solutions and scale operations,” said Charlie Dai, VP and principal analyst at Forrester.

“Microsoft’s rumored willingness to reduce its OpenAI equity in favor of longer-term tech access signals a shift from financial patronage to platform pragmatism,” noted Sanchit Gogia, chief analyst at Greyhound Research. “We see this as Microsoft doubling down on AI enablement over AI ownership — a move that could widen its appeal while containing regulatory risk.”

OpenAI’s transformation and growing independence

OpenAI’s journey from non-profit research lab to potential public company highlights the enormous capital requirements of cutting-edge AI development.

The ChatGPT-maker recently reaffirmed nonprofit control – a structure that would allow it to pursue both social good and profits. This structure would make a future IPO possible while maintaining some connection to its original mission.

“For Microsoft, stepping back from equity while securing longer-term access could reduce risk exposure while preserving its core advantage: exclusive commercialization rights embedded in its enterprise stack,” Sengar said.

Simultaneously, OpenAI has been building independence from Microsoft. The company has pursued enterprise customers directly – potentially competing with Microsoft – while developing its own computing infrastructure called “Stargate” with partners such as SoftBank and Oracle.

“Considering the rapidly evolving AI landscape with what DeepSeek has shown, it would be prudent also for Microsoft to diversify and hedge its bets beyond OpenAI to boost Copilot capabilities with multiple models and give its enterprise customers more choice,” Shah pointed out.

Mission versus money

At its core, OpenAI’s transformation illustrates the fundamental tension between its original mission to develop “AGI that benefits humanity” and the commercial realities of current AI development.

“The implication for PBC structure stems from what is OpenAI’s future vision on how it wants to position the company and make greater strides in AGI, which requires greater focus on ethics, fairness, safety, accessibility, and governance,” Shah added.

Forrester’s Dai said OpenAI’s potential transition to a nonprofit corporation could prioritize accountability and transparency for ethical AI development over pure profit, driving the AI industry to rebalance innovation with societal safeguards in AI’s rapid evolution.

“Investor patience and AGI’s uncertain timeline will be the key challenge to balance mission alignment with capital needs, while the reliance on enterprise revenue and ethical governance will determine long-term viability,” he added.

Regulatory hurdles add another layer of complexity. Delaware’s attorney-general, Kathy Jennings, according to the report, announced plans to review whether OpenAI’s new structure ensures “the non-profit entity retains appropriate control over the for-profit entity.”

What’s next?

Despite the tensions, both companies recognize their mutual dependence. Industry observers believe the outcome will have far-reaching implications.

“That transition, if successful, may establish a new hybrid model for the AI sector, where mission alignment coexists with commercial scale,” Sengar added. “But the real test will be whether OpenAI can maintain investor trust while pursuing long-horizon goals like AGI, which have uncertain timelines and ethical landmines.”

“Investor patience and AGI’s uncertain timeline will be the key challenge to balance mission alignment with capital needs, while the reliance on enterprise revenue and ethical governance will determine long-term viability,” Dai said.