Microsoft reworks OpenAI agreement, eliminating revenue-sharing payments as earnings report looms with Azure growth under scrutiny

Microsoft reworked its agreement with OpenAI on Monday: Microsoft will no longer make revenue-sharing payments to OpenAI, while OpenAI continues making payments to Microsoft. However, Microsoft lost exclusive access to OpenAI's intellectual property and AI models, and OpenAI can now share its data with other companies and serve products across cloud partners beyond Azure.

For Q3, Microsoft is expected to report earnings per share of $4.04 on revenue of $81.46 billion (up from $3.46 EPS and $70.06 billion revenue in the same quarter last year). Azure revenue is expected to increase 38.24%. Bank of America Global Research analyst Tal Liani wrote that 'for the stock to go up, we believe the company would need to beat the Azure growth expectations.'

Microsoft's stock has declined over 20% in the last six months, weighed down by concerns about Azure and AI growth, Copilot adoption, risks to enterprise software, and the OpenAI relationship. The PC industry faces global memory shortage pressures, with global PC shipments expected to fall 11.3% this year.