OpenAI does it again

 

On Amazon’s recent Q325 earrings call, CEO Andy Jassy touted the company’s $200B backlog, and noted that this amount did not include “several unannounced new deals in October, which together are more than our total deal volume for all of Q3.” Now it appears one of those deals is with OpenAI, which just committed to spend $38B on AWS infrastructure over multiple years. 

 

The deal will almost certainly make OpenAI one of AWS’s biggest customers, but it doesn’t make AWS OpenAI’s biggest partner. The privately held OpenAI has recently signed a 5-year, $300B cloud contract with Oracle and a $250B deal with Microsoft Azure. The Azure deal represents incremental spending, since OpenAI has been running its workloads in Azure for several years already.  The newest deal between OpenAI and Microsoft gives the latter rights to OpenAI’s models and products, as well as a 27% ownership stake in the company.  

 

Microsoft accounts for that ownership stake using the equity method, meaning it has to report its share of OpenAI’s losses. In the most recent quarter, that shaved $3.1 billion off Microsoft’s net income. In addition, Microsoft has invested $11.6B in OpenAI, and is committed to invest another $1.4B.

 

If OpenAI and its partial owner Microsoft continue to rack up losses, some of the red ink will be due to spending with Microsoft’s competitors, AWS and Oracle. Meanwhile Amazon is posting gains, not losses, on its AI investment, reporting that more than 40% of its Q3 net income came from a $9.5B pretax paper gain on its stake in Anthropic.  

Microsoft is clearly playing the long game, betting that intellectual property will end up being the most valuable piece of the AI puzzle. And the cloud provider may have knowingly pushed OpenAI into deals with its competitors by reserving capacity for other customers instead of OpenAI. Azure certainly has no shortage of demand - it grew 40% year-on-year in the most recent quarter, and reported $392B in remaining performance obligations (RPOs), almost double the $200B AWS backlog. Analysts will be keeping a very close eye on backlog/RPOs when these companies report again early in 2026.