Tech giant Microsoft (MSFT) disclosed that it generated $24.1 billion in revenue from OpenAI during its latest fiscal year, which shows just how important the partnership has become. Based on Microsoft’s earlier AI growth figures, OpenAI may have produced about 70% of the company’s total AI-related sales during the year ended in June.
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For context, OpenAI pays Microsoft to use its cloud-computing infrastructure, which provides the enormous computing power needed to build and run AI models. OpenAI also covers certain model-development costs, while Microsoft receives a share of its revenue. Because Microsoft groups all of these payments together, investors have had trouble figuring out how much of its AI growth comes from OpenAI and how much comes from other customers.
It also doesn’t help that Microsoft has only provided limited details about the size of its overall AI business. Indeed, at the end of the March quarter, CEO Satya Nadella said that AI revenue had reached a pace that would equal more than $37 billion over a full year. Using Microsoft’s reported growth rate, Bloomberg estimated that the business generated roughly $34 billion during the fiscal year. Compared with the $24.1 billion connected to OpenAI, that suggests OpenAI contributed close to 70%.
OpenAI Makes Up Less than 10% of Microsoft’s Total Business
However, OpenAI is much less important when compared with Microsoft’s entire business, as its contribution made up less than 10% of total company revenue. Microsoft also recorded about $51 billion in commercial bookings during its latest quarter, with much of that demand coming from customers outside the AI startup market. Even so, OpenAI appears to have produced most of the increase in annual bookings.
What Is the Price Target for Microsoft?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 35 Buys and one Hold assigned in the past three months, as indicated by the graphic below. Furthermore, the average MSFT price target of $560.52 per share implies 14.4% upside potential. (See MSFT Stock Forecast).
