Microsoft and OpenAI unveil a deal extending IP rights, adding independent AGI verification, and giving both sides more freedom while maintaining Azure ties.

In the new agreement, Microsoft gets a 27% stake in OpenAI's for-profit business, the OpenAI Group PBC, worth around $135 billion.

Under the new pact, Microsoft will get a 27% ownership stake in OpenAI worth about $135 billion, the companies said in a statement Tuesday. In addition, Microsoft will have access to the artificial intelligence startup’s technology until 2032, including models that achieved the benchmark of AI general intelligence.

However, Microsoft revealed a major drop in profit due to what it termed was an “equity method investment” in OpenAI Group PBC, resulting in a 41-cents-per-share hit to its earnings and a $3.1 billion drop in its net income. Even so, the company’s bottom line was still healthy at $27.7 billion, up from $24.67 billion in the year-ago quarter.

Microsoft made its first investment in Sam Altman's OpenAI in 2019. It now holds a 27% in OpenAI's for-profit business.

Microsoft's (MSFT) 27% stake in OpenAI (OPAI.PVT) is currently valued at $135 billion, according to the two companies' latest for-profit agreement. This all comes ahead of Microsoft's fiscal first quarter earnings results due out after the closing bell on Wednesday.

OpenAI established a for-profit arm valued at $500 billion Tuesday, doing so through a long-anticipated corporate restructure that provides Microsoft with a large stake in the new company as it looks to expand on its rapidly expanding artificial intelligence offerings.

Microsoft lifted a funding restriction on OpenAI that became a point of conflict after ChatGPT took off required more computing power.