Microsoft’s AI ambitions are in large part tied to OpenAI, but the financial picture surrounding the connection is pretty murky. In its latest annual report, Microsoft disclosed a $4.7 billion line item under “other, net” expenses for the fiscal year ending June 30, with no itemized breakdown. What it did admit is that the bulk of that figure reflects “net recognized losses on equity method investments,” according to reporting by The Wall Street Journal. And while it’s long been understood that OpenAI falls into that category, the filing never mentions the company by name, nor does it classify OpenAI as a related party.
Under US GAAP, the equity method is applied when a company has “significant influence” over another, typically with a 20% to 50% stake. That level of influence generally requires clear disclosure of material related-party transactions, particularly if the investee is financially significant. In OpenAI’s case, it is. A recent secondary share sale reportedly valued OpenAI at around $500 billion. Even if Microsoft’s economic stake is diluted below 49% by profit caps or partnership mechanics, the fair market value of its position is still potentially north of $100 billion.
