Evercore ISI: new Microsoft/OpenAI deal gives both greater flexibility

Investing.com -- Evercore ISI analyst Kirk Materne commented Monday on Microsoft and OpenAI's announcement to amend their partnership agreement, saying the revised terms simplify the relationship while providing both companies greater flexibility.

Under the new agreement, Microsoft will no longer pay a revenue share on OpenAI products it resells on its cloud platform, and the software company has dropped its exclusive right to sell the startup's AI models.

Materne said the agreement gives Microsoft greater clarity, flexibility and economic certainty in exchange for reduced exclusivity, while OpenAI gains broader market access. Microsoft maintains a preferred strategic role, long-term access to OpenAI technology through 2032, and ongoing participation in OpenAI's growth.

The analyst noted that AGI-linked terminology appears to have been removed from the commercial framework, which clarifies certain cutoff dates around IP access through 2032 and revenue share economics through 2030, now with a cap.

"We do not believe this revised agreement should come as a major surprise to investors at this point, as Microsoft has increasingly signaled interest in a broader multi model strategy, while OpenAI has clear incentives to expand distribution more broadly across the market," Materne said.

Under the revised terms, OpenAI can now serve all of its products across any cloud provider, meaning Azure is no longer the only path for OpenAI distribution and deployment. Microsoft's license to OpenAI IP through 2032 remains in place but is now non-exclusive.

On the economic side, Microsoft no longer pays a revenue share to OpenAI, while OpenAI's revenue share payments to Microsoft continue through 2030 at the same percentage, subject to a cap. Materne said the new agreement does not reference AGI terminology or AGI-related trigger points, which should reduce prior investor uncertainty.

Microsoft remains the anchor commercial and infrastructure partner in the relationship, Materne said.

Evercore ISI maintains an Outperform rating on Microsoft shares with a $580 price target.

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