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- OpenAI is projected to turn a profit in 2029, a new report from The Information says.
- Microsoft also appears to be on track to get a 20% cut of OpenAI's revenue, per the report.
- OpenAI is fresh from a historic funding round of $6.6 billion.
Investors will likely be waiting a while before OpenAI starts making a profit.
A new report from The Information, which analyzed the company's financial documents, revealed that while OpenAI is burning less cash than previously thought, it's still years away from turning a profit.
The report said the company doesn't expect to become profitable until 2029 when revenue is projected to hit $100 billion. Between 2023 and 2028, OpenAI reportedly expects its losses to total $44 billion.
However, a metric that OpenAI is sharing with investors — which excludes some expenses such as training costs for large language models — estimates that the company will become profitable in 2026, per The Information.
While the figures are significantly larger than those of most startups, it's not uncommon for companies working on expensive tech to show big losses early on.
"Developing advanced AI takes a lot of time and money, so it's expected that OpenAI would face high costs before it starts making a profit," Kate Leaman, chief market analyst at AvaTrade, told Business Insider.
Microsoft, which has funneled some $13 billion into the company, is also set to benefit more from its partnership with OpenAI than previously thought. The documents analyzed by The Information suggest that the tech giant will get a 20% cut of OpenAI's revenues, higher than previously reported.
Leaman said Microsoft's contribution to OpenAI in cloud services and infrastructure explained the high percentage of revenue.
"The partnership with Microsoft might mean OpenAI earns less from each dollar of revenue, but it could help the business grow significantly in size, meaning the impact may not be as bad as initially anticipated," she said.
The Information's report comes just over a week after OpenAI closed the most valuable funding round in Silicon Valley history.
The company raised $6.6 billion from a series of new and existing investors, valuing it at $157 billion. In addition to the new funding, OpenAI has also tapped a $4 billion credit facility from an array of banks.
While it's common practice for fast-growing companies to establish a line of credit, OpenAI's search for more funds signals that its loss-making operations are set to become even more expensive.
The company's flagship product, ChatGPT, is still free to use at the basic level but expensive to run and maintain due to the significant computing power required.
OpenAI is also planning major improvements to its flagship AI model. Over the summer, the company shared a new five-level classification system to track its progress toward artificial general intelligence and launched a new upgraded model that has some reasoning abilities.
The company's push to build a more intelligent model means it will need to funnel even more money into training. According to The Information, OpenAI is currently projecting that its compute costs for model training could hit as high as $9.5 billion a year in 2026.
This means investors need to be ready to play the long game.
"Investors should look at the company's long-term potential — if OpenAI stays ahead with its technology, it has the potential to be very profitable in the future," Leaman said.
Representatives for OpenAI did not immediately respond to a request for comment from Business Insider, made outside normal working hours.