What just happened? The Department of Defense has awarded a one-year, $200 million contract to OpenAI to develop advanced artificial intelligence tools aimed at addressing critical national security challenges “in both warfighting and enterprise domains.” The deal was announced Monday in the DoD’s daily list of newly awarded contracts.

The Department of Defense said OpenAI will receive $2 million immediately for research and development purposes. The company will also use the funds to test and evaluate prototype AI models before deployment.

Under the agreement, OpenAI will develop frontier AI capabilities to improve healthcare for service members, streamline data analysis, and support proactive cyber defense. Most of the work will be focused in the Washington, DC area, with an estimated completion date of July 2036.

In a separate post, OpenAI noted that the contract is part of its new OpenAI for Government initiative, which develops AI solutions for the public sector. The company already has partnerships with multiple federal agencies, including NASA, the NIH, the Air Force, and the Treasury Department, but this is the first time it has been awarded a contract by the DoD.

The new initiative will unify all existing partnerships that OpenAI has with federal, state, and local public-sector agencies in the US, enabling them to access OpenAI’s latest and most capable AI models, including ChatGPT Enterprise and ChatGPT Gov. The company will also offer custom AI models to the DoD for national security purposes “on a limited basis.”

OpenAI noted that the contract requires the DoD and other government agencies to comply with its usage policies and safety guidelines. The company’s current policies forbid its partners from using its technology to develop weapons, but it no longer prohibits them from using it for “military and warfare” – a clause it removed from its policy document last year.

Despite being a major milestone in its short history, the $200 million contract is likely to contribute very little to OpenAI financially. The company’s annualized revenue hit $10 billion in June 2025, up from $5.5 billion in December 2024. It has also announced a revenue target of $12.7 billion for 2025, fueled by the growing adoption of ChatGPT across various sectors.

OpenAI secured the DoD contract several months after announcing a collaboration with defense technology startup Anduril to develop AI tools for “national security missions.” Anduril received a $100 million defense contract in December, just weeks after OpenAI rival Anthropic announced partnerships with Palantir and Amazon to deploy its AI models for US defense and intelligence agencies.