Microsoft's Biggest AI Customer Is Also Its Biggest Risk

Microsoft's (NASDAQ:MSFT) fiscal 2026 annual report, filed in late July, put a hard number on a relationship investors have largely had to gauge from the outside. The company booked $24.1 billion of revenue from its commercial arrangements with OpenAI, and the ChatGPT maker owed Microsoft $6.0 billion at June 30.

For perspective, Microsoft's total revenue for fiscal 2026 (the 12 months ended June 30) was $331.8 billion, up 18% year over year. OpenAI alone contributed about 7% of it. No other customer is identified, or given a number, in the filing.

In my view, that one line conveys both sides of the Microsoft story. The company owns a big chunk of OpenAI, so it benefits if the ChatGPT maker keeps scaling. But it's also spending huge amounts building infrastructure for a customer that reportedly spends much more cash than it brings in.

Image source: Getty Images.

A $24.1 billion customer

The disclosure is there because Microsoft is a part owner of OpenAI -- a big enough owner that accounting rules classify the artificial intelligence (AI) leader as a related party and require Microsoft to report the money moving between them.

The filing notes the $24.1 billion includes revenue-sharing payments, but it doesn't break the total down. Investors can't tell how much came from OpenAI renting Azure computing power and how much came from OpenAI paying Microsoft a cut of its own sales.

Whatever the split, the size is striking. Azure, Microsoft's cloud computing platform, topped $100 billion of revenue for the first time in fiscal 2026, growing 41% year over year. OpenAI's arrangements alone equaled about a quarter of that.

Microsoft doesn't rank its customers, and it says that none made up more than 10% of revenue. But OpenAI is the only one it names, and it is difficult to picture another AI customer anywhere close to this size.

The backlog leans on OpenAI even harder

The greater concentration lies in the revenue Microsoft has already signed up for the future. The company finished fiscal 2026 with $678 billion of commercial remaining performance obligations (contracted work it has not yet delivered or invoiced), up 84% year over year. Excluding OpenAI, chief financial officer Amy Hood said on the July earnings call, that backlog grew 25%. Put another way, most of the year's growth in contracted future revenue comes from one customer.

That's mainly because OpenAI committed last October, as part of its corporate restructuring, to buy an additional $250 billion of Azure services.

Of course, there's a flip side. Microsoft came out of that restructuring with around 27% of OpenAI at the time, a stake it valued at about $135 billion. If OpenAI keeps scaling, Microsoft collects twice -- once by providing its computing power, and again as a part owner.

What if the spending slows down?

The risk is that OpenAI isn't a typical anchor customer. The company burned $3.7 billion in the first three months of 2026, according to The Information. More recently, the Financial Times said that OpenAI expects to burn through almost $280 billion of cash from 2026 through 2030. After all, a business using up cash at that rate can keep spending only as long as investors keep financing it.

The terms of the relationship have loosened, too. In April, the companies revised their deal. OpenAI's revenue-sharing payments to Microsoft now extend through 2030 with a total cap. And OpenAI can now serve its products to customers via any cloud provider, although Microsoft is still its main partner and its products ship first on Azure.

Microsoft, meanwhile, has been building as if the demand is permanent. Its additions to property and equipment totaled $115.9 billion in fiscal 2026, up almost 80% from $64.6 billion the year before, which itself was up about 45% from the year before that.

If OpenAI ever slowed its spending, Azure's growth rate could reflect it quickly. So could that backlog.

Granted, the other 93% of Microsoft's revenue comes from a customer base about as broad as any in business, and operating income grew 21% in fiscal 2026. But the growth story behind the stock leans on Azure, and Azure now leans on OpenAI more than on any other single name.

At about $494 as of this writing, shares trade about 11% below their 52-week high and at about 28 times earnings. Plenty of continued cloud growth is already baked into that price, and OpenAI is a significant part of what is driving the growth.

In the end, I believe the disclosure is a reason for attention, not alarm. The business is excellent. But more of its growth than ever seems to rely on one customer's spending. That's why I see Microsoft stock as a hold right now.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.