Perplexity Inks Microsoft AI Cloud Deal Amid Dispute With Amazon

(Bloomberg) — AI startup Perplexity inked a $750 million deal with Microsoft Corp. to use its Azure cloud service amid a legal feud with Perplexity’s longtime cloud partner, Amazon.com Inc.

The three-year commitment will let Perplexity deploy AI models through Microsoft’s Foundry service, including those made by OpenAI, Anthropic and xAI, according to people familiar with the deal, who requested anonymity to discuss a private matter.

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“We are excited to partner with Microsoft for access to frontier models from X, OpenAI and Anthropic,” a Perplexity spokesperson said.

Perplexity hasn’t shifted spending from Amazon Web Services, long the startup’s main cloud provider, as part of the Microsoft deal, the spokesperson added.

“AWS remains Perplexity’s preferred cloud infrastructure provider, and we’re excited to announce expansions of that partnership in the coming weeks,” he said.

Microsoft and Amazon declined to comment.

Perplexity is one of the more richly valued AI startups but faces stiff competition from Alphabet Inc.’s Google and OpenAI in its ambition to rethink how people search for information online. It also hasn’t raised nearly as much capital as OpenAI and Anthropic, which have recently engaged in a wave of infrastructure deals.

Big companies typically rent cloud services from multiple partners, both to get access to unique services and to limit their reliance on any single vendor. That phenomenon has accelerated during the AI age, as businesses experiment with new tools and sign deals with model builders and the cloud providers whose servers run that software.

Perplexity built much of its business on AWS, using Amazon’s Bedrock service to access Anthropic models for Perplexity’s search engine. Perplexity Chief Executive Officer Aravind Srinivas is a repeat speaker at AWS conferences, saying in a 2023 appearance that he had decided to go “all-in” on Amazon’s cloud. AWS, in turn, has held up Perplexity as one of the cutting-edge AI customers using its services.

Still, in recent months the two companies have been engaged in a legal fight. In November, Amazon sued Perplexity to try and stop the startup from letting consumers use its AI tools to shop and buy items from the Seattle-based cloud and e-commerce company’s online marketplace. Perplexity responded by calling Amazon a bully and its actions “a threat to user choice.” Srinivas said in November that his company has made “hundreds of millions” in commitments to AWS.

For Microsoft, the Perplexity deal boosts its efforts to position Azure as the place to build AI applications and deploy models from a variety of vendors. Microsoft has long offered models from its partner OpenAI and in November struck a deal with Anthropic to do the same.

“Our customers expect to use multiple models as part of any workload,” Chief Executive Officer Satya Nadella said during an earnings call earlier this week. “And we offer the broadest selection of models of any hyperscaler.”

Over 1,500 Microsoft Foundry customers have already used both OpenAI and Anthropic models, Nadella said. The number of customers spending over $1 million per quarter on Foundry grew nearly 80% in the quarter which ended in December, he added.

–With assistance from Shirin Ghaffary and Rachel Metz.

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