This quarter, Microsoft's CFO predicts that the company's investment in OpenAI will impact its profit.

• Microsoft is expected to record approximately $1.5 billion in other expenses, primarily due to an anticipated investment loss at OpenAI.
• Microsoft has invested approximately $14 billion in OpenAI, including its participation in a recent funding round.
• The software company said its partnership with OpenAI is still delivering results.

's massive investment in OpenAI is weighing on earnings.

After Microsoft released its quarterly earnings report on Wednesday, CFO Amy Hood stated that she anticipates the company to incur a $1.5 billion loss in the current period, primarily due to an expected loss from OpenAI.

Microsoft has invested nearly $14 billion in OpenAI, whose ChatGPT assistant has become a viral sensation and sparked a new industry called generative artificial intelligence. This trend has resulted in billions of dollars in new revenue for Microsoft.

The company is projected to lose $5 billion this year, despite generating $4 billion in revenue, according to a report by The Information.

Microsoft accounts for its loss under the equity method, which refers to a company's share of the invested company's profit or loss in a given period, a Microsoft spokesperson stated.

Our partnership with OpenAI continues to deliver results, as we build differentiated IP and drive revenue momentum, not due to a change in our partnership or investment in OpenAI.

Despite Microsoft's earnings and revenue surpassing expectations in the fiscal first quarter, the stock dropped in extended trading following the company's forecast for slower-than-anticipated growth.

Microsoft has been integrating OpenAI's models into several products and acting as the startup's exclusive cloud infrastructure provider. However, on Tuesday, Microsoft's GitHub subsidiary announced that developers can now use models from Anthropic instead of OpenAI's GPT-4o to power the Copilot Chat feature.

Microsoft invested an additional $750 million in OpenAI in October, increasing its valuation to $157 billion.

Microsoft's competitors are also engaging in a similar game, with most notably having invested $4 billion in AI model company Anthropic, whose founders previously worked at OpenAI. Amazon will report its earnings on Thursday.

Microsoft's OpenAI investment was a first for the company, but it has accounted for $2.3 billion in other expenses in the past four quarters.

During the earnings call, Microsoft CEO Satya Nadella stated that the partnership with OpenAI has been advantageous for both parties and that the company is pleased with its investment stake in OpenAI.

OpenAI didn't immediately respond to a request for comment.

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