Microsoft takes $3.1 billion hit from OpenAI investment (www.cnbc.com)

Microsoft disclosed a $3.1 billion charge in its fiscal Q1 results tied to its “equity method” investment in OpenAI, a move that reduced EPS by $0.41 even as overall net income rose to $27.7 billion ($3.72/sh). The company says it has committed $13 billion to OpenAI, with $11.6 billion funded through September. The announcement follows OpenAI’s recapitalization that created a nonprofit OpenAI Foundation holding a 26% stake in the for‑profit arm (current and former employees/investors hold 47%), while Microsoft’s stake is reported as about 27% on an as‑converted diluted basis (value cited at ~$135B). Microsoft also disclosed that OpenAI has contracted to purchase an incremental $250 billion of Azure services, but Microsoft will no longer have the right of first refusal as OpenAI’s compute provider. For the AI/ML community this underscores a complicated, high‑stakes alignment: deep financial and cloud ties between the two organizations coexist with growing competitive overlap (Microsoft has even listed OpenAI as a competitor in AI and search). Technically important details include the accounting treatment (equity method hit), the loss of exclusive compute rights (which could diversify OpenAI’s infrastructure choices), and the massive Azure services commitment that materially affects cloud demand projections. Practically, the move signals continued heavy capital flows into foundation‑scale model development and a shifting vendor landscape—Microsoft gains product and revenue synergies but faces strategic risk as both partner and rival in core AI markets.