OpenAI has a $200 million Pentagon contract to make AI for the battlefield. This is a significant change for the company, which previously did not allow military applications but is now actively developing defense systems. The one-year arrangement makes the ChatGPT developer a direct competitor to established defense contractors in the quickly growing military AI field.
OpenAI will receive a contract on June 16, 2025, to develop “prototype frontier AI capabilities to address critical national security challenges in both warfighting and enterprise domains” through July 2026. The work will primarily take place in Washington, D.C., and the Pentagon has already allocated around $2 million for the first phase.
Policy Change Opens Door for Military
In January 2024, a modest policy move set OpenAI on the path to becoming a partner of the Pentagon. The corporation took off explicit bans on “military and warfare” applications from its usage standards. Instead of banning all military applications, it implemented more specific rules.
The new policy merely says that users can’t use services to “harm yourself or others,” which includes “developing or using weapons.”
OpenAI stated that the change was necessary to enable “national security use cases that align with our mission” and to provide “clarity and the ability to have these discussions.”
Military Leadership with a Plan
Key staff changes in 2024 and 2025 accelerated OpenAI’s defense-oriented approach. On June 13, 2024, the business named retired U.S. Army General Paul M. Nakasone to its Board of Directors.
From 2018 to February 2025, Nakasone was the director of the National Security Agency and the commander of U.S. Cyber Command. He became a member of OpenAI’s Safety and Security Committee, which provides guidance on safety and security considerations for all corporate projects.
OpenAI’s military recruitment didn’t just include the former head of the NSA; it also included other notable figures. Kevin Weil, OpenAI’s Chief Product Officer, and Bob McGrew, who previously served as the Chief Research Officer, were promoted to lieutenant colonels in the Army Reserve on June 13, 2025.
The Financial Situation of Defense Revenue
The $200 million contract with the Pentagon is just a small part of OpenAI’s significant revenue growth. As of June 2025, the company’s annualized revenue run rate has grown from $5.5 billion in December 2024 to $10 billion.
The arrangement with the Pentagon accounts for approximately 2% of OpenAI’s current annual revenue run rate. The corporation, on the other hand, stated that it lost around $5 billion in 2024 despite an increase in revenue.
OpenAI aims to generate $12.7 billion in sales in 2025 and $125 billion by 2029, which suggests that defense contracts may become a more significant source of income if the business expands its military applications.
Increasing Competition Among Big Tech Defenses
OpenAI is entering a highly competitive and lucrative military sector that is primarily dominated by major tech companies. Between 2019 and 2022, the Pentagon and U.S. intelligence agencies awarded $53 billion in contracts to major technology companies.
Senators introduced the “Protecting AI and Cloud Competition in Defense Act” because they were concerned about competition. Senators are trying to remove Big Tech’s hold on Pentagon cloud and AI contracts. The Pentagon’s Maven Smart System contract with Palantir was increased by $795 million because combatant commanders needed it more.
Anthropic, a competitor of OpenAI, announced that it would collaborate with Palantir and Amazon to provide AI models to U.S. defense and intelligence organizations.
Warfighting Apps Being Looked At
The Pentagon contract for OpenAI clearly states that the company has “warfighting” capabilities, but the company’s own blog post doesn’t include this term at all. OpenAI, on the other hand, focuses on results such as helping military personnel access healthcare and supporting cyber defense.
This message gap shows that there are still problems with the development of AI weapons. OpenAI’s usage standards still stipulate that they cannot “develop or use weapons,” but the removal of other military constraints renders it unclear how these technologies can be utilized on the battlefield.
The contract marks the first step in OpenAI’s new “OpenAI for Government” program, which will provide U.S. government agencies with access to custom AI models for national security purposes.
Plans for the future of defense expansion
It appears that OpenAI’s military initiative is just getting started. The company’s hiring of former NSA leaders and forming key defense relationships demonstrate that it remains committed to military applications.
The Pentagon contract covers both “warfighting and enterprise domains,” which means it can be used in a wide range of military operations. The work must be done by July 2026, which gives a schedule for the first deliverables. If these are successful, there will probably be more contracts.
OpenAI’s defense transition demonstrates that more people in Silicon Valley are recognizing that military applications are both beneficial to business and crucial for the country. The company’s trajectory, from being banned from military use to becoming a partner with the Pentagon, demonstrates how rapidly AI policy can shift in the presence of competition.
Key Takeaways:
- OpenAI has secured a $200 million Pentagon contract to develop battlefield AI capabilities. This marked the company’s shift from banning military applications to actively building defense systems.
- In January 2024, the company removed explicit military prohibitions from its usage policies and added former NSA Director Paul Nakasone to its board of directors.
- OpenAI executives were appointed as Army Reserve officers, and the company worked with defense contractor Anduril on counter-drone systems.
- The Pentagon contract is worth approximately 2% of OpenAI’s $10 billion annual revenue run rate, but it places the company in the competitive $53 billion defense technology market.