AI Daily: OpenAI laying groundwork for IPO at up to $1T valuation

Catch up on the top artificial intelligence news and commentary by Wall Street analysts on publicly traded companies in the space with this daily recap compiled by The Fly:

GROUNDWORK FOR IPO: Microsoft (MSFT)-backed OpenAI is laying the groundwork for an IPO that could value the company at up to $1T, Reuters’ Echo Wang, Kenrick Cai, Deepa Seetharaman and Krystal Hu report. According to people familiar with the matter, OpenAI is considering filing with securities regulators as soon as the second half of 2026, and in preliminary discussions, the company has looked at raising $60B at the low end and likely more. Talks are in the early stages and plans, including the figures and timing, could change depending on business growth and market conditions, according to the report.

MICROSOFT RESULTS: Microsoft reported Q1 adjusted EPS of $4.13 and Q1 revenue of $77.7B, both better than the expected $3.66 and $75.39B, respectively. “Our planet-scale cloud and AI factory, together with Copilots across high value domains, is driving broad diffusion and real-world impact,” said Satya Nadella, chairman and chief executive officer of Microsoft. “It’s why we continue to increase our investments in AI across both capital and talent to meet the massive opportunity ahead.”

The company also reported Q1 Intelligent Cloud revenue of $30.9B, and Q1 Productivity and Business Processes Revenue of $33B.  Microsoft said, “It was a very strong start to our fiscal year. Microsoft cloud revenue surpassed $49 billion, up 26% year over year. And our commercial RPO increased over 50% to nearly $400 billion, with a weighted average duration of only two years. We’re seeing increasing demand and diffusion of our AI platform and family of copilot’s, which is fueling our investments across both capital and talent. When it comes to infrastructure, we’re building a planet scale cloud and an AI factory maximizing tokens per dollar per watt while supporting the sovereignty needs. Of customers and countries. We’re innovating rapidly across the family of copilot, spanning the high value domains of information, work, coding, security science, health and consumer, and as you saw yesterday, we closed a new definitive agreement with OpenAI, marking the next chapter in what is one of the most successful partnerships and investments our industry has ever seen. This is a great milestone for both companies, and we continue to benefit mutually from each other’s growth across multiple dimensions.”

The company added, “We have the most expansive data center fleet for the AI era, and we are adding capacity at an unprecedented scale. We will increase our total AI capacity by over 80% this year, and roughly double our total data center footprint over the next two years, reflecting the demand signals we see. Just this quarter, we announced the world’s most powerful AI data center. Fairwater in Wisconsin, which will go online next year and scale to two gigawatts alone. And we have deployed the world’s first large scale cluster of Nvidia GPT 300. We are building a fungible fleet that’s being continuously modernized and spans all stages of the AI. Life cycle, from pre-training to post-training to synthetic data generation and inference… When it comes to our first party models, we are excited by the performance of our new AI models for text, voice and image generation, which debuted among the top in the industry leaderboards. And we continue to make great progress with our five family of slms, which now have been downloaded over 60 million times, up three x year over year. Beyond models in foundry, we are providing everything developers need to design, customize and manage AI applications and agents at scale. Our new Microsoft Agent framework helps developers orchestrate multi-agent systems with compliance, observability and deep integration.” Comments taken from Q1 earnings conference call.

Microsoft added: “The combination of OpenAI’s conversion to a public benefit Corp. and the ongoing nature of our partnership will result in increased volatility. Therefore, going forward, we will provide our outlook excluding any impact from our investments in OpenAI. On that basis, in Q2. Other income and expense is estimated to be roughly $100 million, as interest income will more than offset interest expense. And we expect our Q2 effective tax rate to be approximately 19%.”

AI LICENSING AGREEMENT: Gannett (GCI) announced a new AI licensing agreement with Microsoft. Gannett will partner with Microsoft on their upcoming launch of its Publisher Content Marketplace. “We are also very excited to announce this morning our newest AI licensing agreement,” said Michael Reed, Gannett chairman and CEO, in comments taken from the company’s Q3 earnings press release. Additional details were not disclosed.

ALPHABET RESULTS: Alphabet (GOOGL) reported Q3 EPS of $2.87 and Q3 revenue $102.35B, better than expectations at $2.26 and $100.14B, respectively.  The company also reported Q3 Google advertising revenue of $74.18B vs. $65.85B last year, Q3 Google Search & other revenue of $56.57B vs. $49.39B last year, Q3 YouTube ads revenue of $10.26B vs. $8.92B last year, and Q3 Google Cloud revenue of $15.16B vs. $11.35B last year.

“Alphabet had a terrific quarter, with double-digit growth across every major part of our business. We delivered our first-ever $100 billion quarter. Our full stack approach to AI is delivering strong momentum and we’re shipping at speed, including the global rollout of AI Overviews and AI Mode in Search in record time. In addition to topping leaderboards, our first party models, like Gemini, now process 7 billion tokens per minute, via direct API use by our customers. The Gemini App now has over 650 million monthly active users. We continue to drive strong growth in new businesses. Google Cloud accelerated, ending the quarter with $155 billion in backlog. And we have over 300 million paid subscriptions led by Google One and YouTube Premium. We are investing to meet customer demand and capitalize on the growing opportunities across the company.”,” said Sundar Pichai, CEO of Alphabet and Google.

META RESULTS: Meta Platforms (META) reports Q3 EPS ex-charge $7.25, consensus $6.71 16:06 META Reports Q3 revenue $50.08B, consensus $49.41B. Meta Platforms sees Q4 revenue of $56B-$59B. The company said, “Our guidance assumes foreign currency is an approximately 1% tailwind to year-over-year total revenue growth, based on current exchange rates. Our outlook reflects an expectation for continued strong ad revenue growth, partially offset by lower year-over-year Reality Labs revenue in the fourth quarter. The anticipated reduction in Reality Labs revenue is due to us lapping the introduction of Quest 3S in the fourth quarter of last year as well as retail partners procuring Quest headsets during the third quarter of this year to prepare for the holiday season, which were recorded as revenue in the third quarter.”

The company further said, “We expect full year 2025 total expenses to be in the range of $116-118 billion, updated from our prior outlook of $114-118 billion and reflecting a growth rate of 22-24% year-over-year. We currently expect 2025 capital expenditures, including principal payments on finance leases, to be in the range of $70-72 billion, increased from our prior outlook of $66-72 billion. Absent any changes to our tax landscape, we expect our fourth quarter 2025 tax rate to be 12-15%.”

Oppenheimer analyst Jason Helfstein downgraded Meta Platforms to Perform from Outperform without a price target following the Q3 report. The company’s “significant” investment in superintelligence despite the unknown revenue opportunity mirrors its Metaverse spending in 2021 and 2022, the analyst tells investors in a research note. Oppenheimer believes investors will struggle to rationalize the stock’s price-to-earnings multiple until there is visibility into 2027, since Meta’s “aggressive” revenue growth is offset by high spending. It points out that Alphabet (GOOG) shares offer “predictable earnings at a reasonable” valuation. Both companies trading at same multiple and search could outgrow Meta at some point in 2026, the firm contends.

NVIDIA CHIP: After meeting with Chinese President Xi Jinping in South Korea, U.S. President Donald Trump said that while semiconductors were discussed and China planned to talk with Nvidia (NVDA) and other companies about acquiring chips, the conversation did not include Nvidia’s advanced Blackwell AI chips, despite earlier hints that it might, Reuters’ Trevor Hunnicutt and Eduardo Baptista report.

AI DATA CENTER: Amazon (AMZN) has opened Project Rainier, an $11B AI data center on 1,200 acres in Indiana that trains and runs Anthropic’s AI models using more than 500,000 Amazon Trainium 2 chips, CNBC’s MacKenzie Sigalos reports. “This is not some future project that we’ve talked about that maybe comes alive,” Matt Garman, CEO of Amazon Web Services, told CNBC in an interview at Amazon’s Seattle headquarters. “This is running and training their models today.”

AUTONOMOUS EXPERTISE: Chardan analyst Jim McIlree initiated coverage of Kodiak AI (KDK) with a Buy rating and $22 price target. Kodiak trades at an 85% discount to Aurora Innovation (AUR), the analyst tells investors in a research note. The firm says Kodiak’s flagship product is the Kodiak Driver, an artificial intelligence-controlled system installed on trucks that enables autonomous driving. Chardan believes the company’s expertise is unmatched and gives Kodiak an advantage over competitors in other off-road industrial markets.

Northland also started coverage of Kodiak AI with an Outperform rating and $17 price target. Autonomous systems are on the cutting edge of AI evolution and Kodiak is “a key provider in a market with only a handful of alternatives,” says the firm, which adds that demand for such capabilities is “basically unlimited in our view.”