OpenAI's Chief Financial Officer, Sarah Friar, has one major concern off her plate: a potential $135 billion payout to early investor Microsoft by 2030 under the original revenue-sharing agreement is no longer looming.

Under the initial terms, OpenAI was obligated to share 20% of its revenue with Microsoft. Had the ChatGPT developer met its long-term revenue targets, this could have totaled $135 billion. However, with the implementation of previously undisclosed terms in a new agreement between the companies, OpenAI will now only be responsible for a fraction of that amount.

According to informed sources, the two parties have agreed to cap the total payment at $38 billion.

Based on an analysis of revenue projections, if OpenAI achieves its high-target revenue plan, it is likely to hit this payment cap around 2028. According to these revenue forecasts, this cap will save OpenAI approximately $97 billion in expenditures.

This adjustment to the payment cap helps OpenAI present a more compelling long-term growth outlook to investors as it prepares for a potential public listing. Some executives have indicated that the company could initiate its IPO process as early as the end of this year.

OpenAI records this payment to Microsoft as an expense, which reduces its free cash flow. Prior to establishing the payment cap, the company had projected cash burn between 2025 and 2029 to reach $219 billion. Under the latest projections, OpenAI expects to achieve positive cash flow by 2030, with revenue for that year potentially nearing $39 billion.

While Microsoft has forgone hundreds of billions in potential revenue, the new agreement finalized in April provides crucial certainty. OpenAI has agreed to pay Microsoft a portion of its revenue share until 2030. Previously, this sharing arrangement was set to continue until OpenAI achieved Artificial General Intelligence (AGI), a milestone some Microsoft executives feared could happen at any time. Additionally, Microsoft secured the right to resell OpenAI's technology until 2032, unaffected by the timing of any AGI declaration.

However, the new deal is not entirely favorable for OpenAI. In the short term, the renegotiated revenue-sharing agreement may negatively impact its free cash flow. Sources familiar with the matter state this is because, under the old agreement framework, OpenAI had the option to defer a portion of the payments owed to Microsoft until 2032. Its earlier financial forecasts indicated it would need to pay Microsoft between 5% and 12% of its revenue annually as a share until 2030.