Revenue is higher than cost of revenue and revenue is growing faster than cost of revenue.
We know OpenAI is forecasting $25-30B revenue for 2026. They will be very close to breaking even at those number.
Given Anthropic has forecast more revenue than OpenAI and we know has spent less on R&D (cite their desperate scramble for compute capacity!) the rumours of them being profitable this year seem very credible.
Imagine still saying this after open weight models being released everywhere and the likes of DeepSeek keeping their prices at the lowest possible for more than good enough intelligence that even Microsoft is migrating to deploy DeepSeek's models.
The words have meaning in accounting. The basic idea of accounting is to communicate what is going on in the business in as consistent a way as possible. It's not a perfect system, but this stuff really is 101.
To expand on this slightly - startups often argue that marketing expenses should not be reported as part of cost of revenue because they are temporary and will change as they grow and the market becomes more aware of them.
There are arguments for and against this - awareness is an issue for startups, but most large companies continue to market. It is true that it is fairly easy to change the amount a company spends on marketing.
Either way, as the parent says - provided the investors understand it there is nothing weird about doing it this way.
No, they argue they shouldn't be counted as operating expenses because they are basically capex dollars. It's a completely reasonable argument. If I spend $100 million on s&m to get a bunch of customers to my saas, it's not different economically to drilling 20 oil wells at $5 million a pop.
(To explain: It's basically saying they are spending $X now to get them as a customer which will yield a lifetime value which is some multiple of $X. That's a very valid thing to do - see the whole field of cohort analysis for SAAS)
If you drill a dry well, under successful efforts accounting, you expense it. You also make zero dollars.
On top of that, oil wells decline, slowly but surely, just like... customers churn.
If you spend $100 mill on sales and marketing and get zero customers, I'd agree it should expensed. If you get a bunch of customers, it's hard to argue against the capex treatment idea.
Brand equity lasts long after advertising has ceased. Coca-Cola could stop advertising for a year tomorrow and people would still be aware of it and buy it.
For publicly listed company, isn’t marketing expense in the ‘Selling & Marketing Expense’ part under ‘Operating Expense’ and not part of ‘Cost of Revenue’ as well?
Anthropic has a durable advantage that OpenAI does not, as much as they choose to squander it to pump the numbers.
They were first on a few things but the tell is the coherence of the thinking traces of Claude. You have to put a loss on that. GPT 5 series thinking traces are creepy, Gemini thinking traces are disturbing. They both represent forced discontinuities on the policy gradient.
Claude is good at tool use because it's gigantic and well-labeled, but the reason you pay the premium is for a thinking partner, not a tool user.
Claude Code is the cancer that will kill the patient, Boris is the the Kardashian version of Karpathy, with less business sense.
Using a multi-trillion parameter softmax attention transformer to parse nested delimiters is a perverse thing to do. It is hard to imagine a sillier way to boil the oceans than feeding JSON to an LLM, a task that a pushdown automata from the 1960s effortlessly did on a PDP-X.
The API business throws a massive model that by definition can't be inferred efficiently because nothing can across 4 different compute substates, at a problem that DSv4 nails at or near 100% while leaving most of the actual unique value of Claude on the table.
Claude should be in your house and car and your kid's classroom and shit.
Having it write tail -n5?
That's because Anthropic's A-Team is Meta's C-Team. Hell, I fired some of their stars myself.
"OpenAI generated $13.07 billion in revenue in 2025"
Considering just four years ago they were a research lab with hardly any revenue at all, and no corporate muscles for earning revenue, I think that is a very impressive number.
(Sure, they're losing a whole lot of money too. Same goes for almost every other hyper-growth company in the history of tech.)
> Same goes for almost every other hyper-growth company in the history of tech
Except it's not true. No one lost $38.5B in a year just to 'hyper-grow' or whatever it means. Uber accumulated ~$30B loss over a decade.
Edit: I read it wrong. The loss was mostly caused by one-time event[0]:
> Before OpenAI’s switch late last year to become a public benefit corporation, investors in the company received convertible interest rights rather than conventional equity. Under US accounting rules, those interests were treated as liabilities and periodically revalued as the company’s valuation increased.
It looks like that OpenAI is actually quite in line with other companies that lost money to grow.
The total loss is over $60 billion; it was adjusted down by very large numbers due to changes related to the conversion from a non-profit (adjusting it by “net loss attributable to non-controlling members capital” and another thing, sorry working from memory of what Zitron said)
That argument supports any levels of losses, however I also think it’s rather misleading.
Growth means some inefficiencies, but their expenses are largely around commodities like electricity and data centers not a sudden army of salespeople. They also got 150M 11 years ago and 1 billion 7 year ago, they where quite large in 2022.
Basically you don’t get better at writing checks to your local utility which limits how much they can control costs.
In 2022 they only had 335 employees (according to various internet searches but I can't find an original source for that number.) I can't find credible numbers for revenue from the GPT-3 API, which did have some usage - GitHub Copilot started charging a subscription fee on June 21, 2022 - https://github.blog/changelog/2022-06-21-github-copilot-is-n... - and that was running on the OpenAI Codex model so presumably OpenAI had some revenue from that.
AI doesn't work like the rest of the tech industry. The cost of selling another license for a software program is approximately zero.
In the case of AI the marginal cost of the next token is not zero, and is in fact probably not going down much with volume, if at all.
So I'm not sure one can argue that scale will solve everything. It's very much like the old adage "we lose money on every sale, but make it up in volume".
If your losses scale with your growth, while at the same time your competitors are eating into your future user-base, how are you ever gonna become profitable? Only two ways comes to my mind: regulatory capture, and moving upwards into full software-development house.
Look at how a utlity works, in setting price specifically, for things that are considered a public good. The story is not about how much profit or revenue they make. Its about how do you keep it afloat and expanding in the coming year. Thats it.
They gave up on video because three separate Chinese companies were kicking their ass (and for cheaper).
Google has a better image model in the majority of cases. Much faster, too.
Claude Opus and Fable are like a billion times better. It's not even funny. Codex can't do Rust at all.
What does that leave them? Ads in ChatGPT? I've started to just rely on Google search blended with Gemini answers now because it's faster and doesn't spit out a 20-page essay of useless effusive prose.
Open source models will eat them from the bottom.
Will those enterprise contracts be renewed in a market full of alternatives?
There's nothing sticky about this company.
They're making a necklace with Jony Ive though, I guess?
They still have the most recognized AI brand name and they are still the most popular LLM. For most users, a 10% diff between Claude and GPT isnt going to move the needle plus it seems to be a horse race anyways. I think their user base is stickier than you would think. Still, it isn't as sticky as social media and it is cheaper to switch AIs than email accounts.
The R&D expenditure seems reasonable, and the revenue numbers seem realistic. I have no trouble believing they can be profitable by 2030 or much sooner. What I don't get is how you get from $30B in revenue to a nearly $1T valuation, but that seems almost level-headed compared to SpaceX, and it's not like any of the big tech companies' valuations make much sense in the context of their revenue.
The market is pricing in the potential for future revolutionary shifts which seem fairly likely. For instance if there ends up being substantial labor disruption due to LLMs then the economy as we know it is going to end up being reshaped in ways that are difficult to imagine beyond the fact that the LLM providers would likely play a critical role in it.
Similarly, SpaceX has already brought the cost of getting things to space down by a couple of orders of magnitude, and Starship is rapidly progressing with the potential to bring them down a couple more. The aspirational goals there are being able to get things to space on the order of $10-$20/kg. That would dramatically reshape not only space but even transport as we know it, very likely in a way analogous to how the ability to quickly send a 0 or 1 signal long distances for cheap reshaped the world in ways that would be essentially impossible to predict prior to its happening.
I'm bearish on the LLM revolution and bullish on the space one, which generally seems to also be the market consensus.
"""For instance if there ends up being substantial labor disruption due to LLMs" ""
.. who are they gonna sell to if people don't even have money to buy? We live in circular economy... everyone's dependent on someone or the other... you take one leg out of this, and the whole thing stops. UBI won't work either because it will lead to runaway inflation and extreme levels of invasive control over people's lives and what they can and cannot do.
I hope no one here is naive enough to believe that AI would actually be used for general welfare of people.
> What I don't get is how you get from $30B in revenue to a nearly $1T valuation
There is something that has fundamentally changed (or broken, depending on your perspective) with the valuation of American tech companies. They've always traded at a premium, but the pandemic and the encroachment of the monopolists has turned the earth sour.
It's easy actually. If it grows a lot, with decent margins. Grow 30B at 40% pa for 10 years and you arrive at around $850B in revenue, assume 25% operating margins, that's slightly over 200B of operating income, and it all makes a lot of sense.
You can debate the assumptions, but it isn't witchcraft. The math is simple.
Of course it is. But stocks aren’t a measure of current profitability. It’s a bet on future profits.
How many serious, large AI players are there? Google, OpenAI, Anthropic, and who else exactly?
At least one of them will probably win. And winning here means billing almost all companies for AI and automation, consumers, perhaps robotics and research.. and that potential earning is massive.
So yes, I will pay 10 times the worth for the stock now, but paying 1000 per stock for a chance of owning all that future profit is not that outrageous.
Enterprises are becoming increasingly aware that the best models can be used for planning and then cheaper models for execution - all the way to local models for some tasks.
Add in increasing competition from Chinese models… I’m not convinced this revenue growth is guaranteed.
Add in the fact that they claim 900 million weekly uniques. Pretending the growth and cost rates compound as described in the article, they will need to generate about 100x current revenue to growth out of their current hole. That sort of implies that they will have 10x the entire world's population as weekly uniques at that time.
because they have more research and better models coming
building a Rube Goldberg machine on Chinese models might work okay, but it will be brittle, and is unlikely to work as well as the latest and greatest model from OpenAI
global gdp is over 100 trillion. Something like 50-60% is paid to labor. If you assume AI takes a good chunk of labor, the market is gigantic. Really really really gigantic.
If by most, you literally mean > 50%, sure. But I've heard it quoted that knowledge work in advanced economies is something like 40%. So, we are still talking extremely large numbers.
OpenAI likely missed the window to have a successful IPO.
A year ago, even 6 months ago, folks would have been still hypnotized by the hype and they would have pulled it off. Today too many people see a burning ship of cash and no moat to justify the burn. The story just isn’t there anymore.
After reading Financial Times and Ed Zitron's articles[0][1], I've reached the opposite conclusion. OpenAI's situation healthier than what the outsiders once believe:
> Revenue: $13.07 billion
> Cost of Revenue: $7.5 billion
In other words generating tokens is actually a profitable business even for the frontier models. It's best to IPO when it's the case.
Musk best move IMO was going public before anyone else and gobbling up those 85 billion. I'm sure anthropic will do the same, leaving OpenAI maybe holding the bag. We'll see.
> A person familiar with the matter said the large majority of that jump reflected a non-cash accounting charge linked to the company’s previous structure rather than its underlying operations.
> Before OpenAI’s switch late last year to become a public benefit corporation, investors in the company received convertible interest rights rather than conventional equity. Under US accounting rules, those interests were treated as liabilities and periodically revalued as the company’s valuation increased.
> As OpenAI’s worth rose, the increased value of those investor rights created a roughly $30bn charge, added the person. The charge is not expected to recur following the restructuring, they said.
> Stripping out the charge and other non-cash expenses, such as stock-based compensation of staff and computing credits from Microsoft, OpenAI’s losses were $8bn, according to the person.
As to why those are required to be treated as liabilities, the primary point of accounting rules is to ensure the accurate valuation of the business to potential purchasers. Someone who would buy the business before those interests converted would see their ownership get diluted, thus it reduces the value of the business to a prospective buyer, thus an accounting of their books must list it as a liability.
It's not an issue if you're tracking the cash flow of the business or it's overall viability regardless of ownership structure. These book losses are just recognizing that the business has a higher market value so their ownership dilution commitments reduce the present value of the company more.
From the Ars Technica article...
OpenAI’s headline “net loss” number of just over $5 billion in 2024 ballooned to nearly $39 billion in 2025. But the 2025 number includes a significant accounting charge related to investor valuations that shifted amid the company’s 2025 conversion to a for-profit structure. The Financial Times cites “a person familiar with the matter” in reporting that this non-recurring charge was approximately $30 billion and that OpenAI’s 2025 net loss amounted to a more reasonable-looking $8 billion without it.
Profit and loss tracks changes to the fair price of purchasing the business, not operational cash flow. The $30b didn't go anywhere since it's not cash flow, it's acknowledging that someone who purchases OpenAI today would be on the hook for $30b more of future ownership dilution than before 2025.
They might not have spent $30b but they likely valued their asset base at >>> $30b+ and had to adjust that at the time of converting to for profit, is how I read it.
“One time non-recurring” is also just accounting double speak that lets executives cover up dumb stuff while sounding plausibly OK.
It is subsidized by gov contracts. Everyone who has common sense immediately said the real money is Altman getting into the governments pants which is why he and Brockman lobby so hard. You take away those contracts and OpenAI is dead in the water.
Ed Zitron claims to not know what terms mean, but that doesn't mean his ignorance is wisdom.
You can just run his content through AI to get a more balanced flash take. Example:
> Zitron repeatedly describes OpenAI as having "removed" costs — $3.74B in 2024, $17.87B and $3.95B in 2025 — via "net loss attributable to noncontrolling members capital," and says "it's unclear what this means." This is standard consolidated-statement mechanics, not a maneuver. When a parent consolidates entities it doesn't wholly own, the slice of losses belonging to other equity holders is split out as "noncontrolling interests." Nothing is removed or hidden; the total loss is unchanged, it's just allocated. Framing it as OpenAI "lowering" its loss "by removing costs" implies something sketchy where there's only routine GAAP. Saying "I will not speculate further" while leaving that insinuation hanging is the rhetorically convenient version of restraint.
For what it's worth, I think AI is a "bubble" and am not convinced at the long-term sustainability or viability of many of these companies but that doesn't mean that every armchair critic actually has the financial expertise to make accurate arguments.
I mean, his whole sensationalized 8X headline is based on a non-cash conversion charge, which is literally the biggest straw man you can find in the financials. He chose it because he's editorializing even as he leads his post with "I am not going to do very much editorializing". Hilarious.
and 7.81 billion in R&D from last year. I don't know how long it took to build the weights for the current model, or exactly how much that costs, but it's certainly more than zero days and zero dollars.
I also doubt that OpenAI could set that R&D expense to zero and survive without an agreement from Anthropic that they'll do the same... so that R&D expense can't be ignored when figuring up the total cost of the current model.
You're missing the point. There was a lot of debate around if inference was subsidized or not. And that's a huge point to confirm in the public discourse.
> You're missing the point. There was a lot of debate around if inference was subsidized or not.
To answer that question you have to take into account the cost to produce the thing that inference uses. If you don't, then that's like claiming that the total cost of a car is the cost to keep it on a dealer's lot until it's sold.
"Figuring out how much R&D adds to the total cost of a thing" absolutely isn't a new problem. And given that models seem to get supplanted every year, it's not like you're gonna be able to spread those R&D costs out very much.
so they could stop development and research right now and be profitable, considering that gpt 5.5 is often regarded as one of the best models for writing code this is looking pretty good.
Let's take another example: If OpenAI grows to 10 times their current size and continue spending the same amount on research and development they would be profitable today without any other changes to their organizational structure.
This is shaping up to be a relatively good investment compared to a lot of other companies that have IPO'd in the ~2010 era, the only reason why it looks bad because the numbers are just insane.
I heard from Ed Zitron that you can't really turn off "training" on these models even after they have been released because they need continuous re-training to keep up with the changes in the world and the language etc.
Is this correct? if it is, can we even say that research can be turned off entirely?
Yes, but I don’t see either of those scenarios giving them the growth needed to justify a trillion dollar valuation. Especially with the current competition (a competitor releases a much better model, and they have to respond or see their revenue drop).
So I don’t see a company in immediate danger of collapsing, but I also don’t see a great investment at that valuation.
Why exactly? Isn't the primary reason for having public markets that companies can sell equity to fund growth?
The stock market has companies from massive to tiny. Each investor has the right to choose whether or not to invest in any one company. Some might be best served by investing only in profitable blue chips. For others, investing in IPOs is appropriate.
Your ire might be better directed at index companies who change seasoning rules right before a big IPO forcing unsuspecting investors to invest in unsuitable companies. And kudos to indexers like S&P who do not change the rules.
An IPO doesn't mean public is forced to buy the stock. There is a choice for funds or individuals and if they chose to buy it, they should be allowed to in an open market.
The other side of this are companies like Uber where (if we go by your logic), the public markets made a killing betting on a company that had massive losses. Should Uber also be blocked from an IPO even though objectively it turned out great?
Investing and markets will always decide between risk and reward. The risk of OpenAI is that it will never find profitablity but the potential rewards outweigh that in the current market perception.
In fact, the argument kind of shifts here, OpenAI can afford to IPO at this condition and still expect strong subscription precisely because its OpenAI. If it was some idk cooking appliance company with no exponential future payoff, the market would laugh and reject that IPO.
They can do that to OpenAI too but all signs say they wouldn't. You can still short the stock once it hits public if you really believe in the downfall of OAI in the future.
Except certain indices are indeed forced to buy if the stock otherwise meets inclusion criteria, this was a somewhat controversial topic with the recent spacex IPO.
Yes if a company's market value exceeds a certain size, it will be considered to be included in indices, most of which track these things automatically.
They have to apply the rules consistently otherwise it wont make any sense to have these indicies right? Spacex got rejected in one of the big indicies because it was not profitable while it got accepted in another. You can buy from both as an investor or a fund manager. If you think one of them is wrong, it is in your interest to switch. If you don't switch then you indirectly don't see anything wrong with it.
Going back to the point, if we want a free market, it has to be free for all. Spacex can go to 0 tomorrow and cause markets to implode, it can also surge 10x over the next 5 years causing everyone in the market to get richer or it can just drag for 10s of years in the same level.
But you and I do not know the future. We cannot block a company from IPOing just because we think it will fail in the future. If it meets all the existing regs, it should be allowed to IPO. If you want to change the regs, thats a different discussion but one i fundamentally disagree with personally. I think the market should be able to take risks and explore potential otherwise we will stagnate.
These numbers show that OpenAI is boned. They have no path to profitability and if they raise prices or cut services they will strangle their golden goose.
They could have existed indefinitely as a service layer that was reliant on other companies feeling charitable, like Firefox, but they also wanted to get rich.
> The reported 2025 figures include $7.5 billion in cost of revenue, $19.18 billion in research and development, $5.73 billion in sales and marketing, and $1.57 billion in general and administrative expense
Does training of new models go into RnD or cost? And subscription plans' subsidies, are those cost or sales and marketing?
Pretty likely R&D, but obviously would need to be confirmed by OpenAI.
The original reporting includes this:
> The documents revealed how much OpenAI paid Microsoft for services. In the 2025 calendar year, OpenAI paid Microsoft $10.59 billion for “Research and development” expenses. We believe this most likely refers to the cost of training OpenAI’s models.
Your comment made we wonder what happens when the AI company's new model does not have a dramatic improvement and have just knowledge updates, and majority of the users does not upgrade?
Given the enormous cost of training, would it be worth training new models then?
> Given the enormous cost of training, would it be worth training new models then?
I'm not an expert, but is this even an option? I mean models must be refreshed with latest knowldge base periodically even without algo/design improvements, otherwise the lag become too noticeable and it will hurt users and their use-case.
Ed Zitron certainly was right that a constant firehose of denialist AI doom would get him clicks and views from the type of audience who yearns to have their biases confirmed and their fears validated. He's made a lot of hay off that excellent prediction.
Can't really think of anything else he's been right about, though. I don't think "right" is what he's going for anyway, it's all about that validation and a coherent, testable hypothesis takes a very distant second place.
It’s a big number. I wonder what steps we will see to raise revenue leading up to an IPO, and specifically if they’ll cut off the OpenAI subscription that is powering my Open claw install. They have been quite friendly with using the oauth tokens in various harnesses.
They will most certainly cut subscription access, same as Anthropic. It is inevitable that they will go down the same lockin+squeeze route. I unsubscribed from Claude a couple of weeks ago, on gpt now. However, Openai will have to make a similar move.
At that point however open weight model providers will start to shine. All eyes on China.
Musk hiding is Ai inside spacex seems strategic now. Ai forward companies can’t hide losses, but a conglomerate can hide that. Might give grokursor new life.
> OpenAI's spending mix shows why. The reported 2025 figures include $7.5 billion in cost of revenue, $19.18 billion in research and development, $5.73 billion in sales and marketing, and $1.57 billion in general and administrative expense
How the hell did they spend 5.7 billion in "sales and marketing"?
Discounted contracts for big clients? Commissions? Both?
If this can be trusted, they are selling $1 for ~95 cents, and are spending $3 on R&D. This is... Not an unsustainable business model as long as the money keeps flowing.
OpenAI is selling $1 for $2 and spending ~$5 to make that happen. The question is if they get to selling $1 for $2 long enough to make they're investment back.
Daily reminder that API pricing for both OpenAI and Anthropic is profitable today and that the cost of tokens for existing models falls sharply over time for a variety of reasons (unless we go into a far worse hardware inflationary environment than we are in today).
The only thing any of them are losing money on is the 200$ a month plans, and you betchya that they're moving as many enterprises to per token pricing as possible rapidly.
If you're not investing in these companies when they IPO and ideally before that if you are lucky enough to be rich, you deserve to not reap what you didn't sow.
We know OpenAI is forecasting $25-30B revenue for 2026. They will be very close to breaking even at those number.
Given Anthropic has forecast more revenue than OpenAI and we know has spent less on R&D (cite their desperate scramble for compute capacity!) the rumours of them being profitable this year seem very credible.
But a lot of other people are going to happily shell out for Opus 4.8 at way higher prices.
(For tax purposes for most businesses it doesn't matter whether an expense is CORS or not.)
There are arguments for and against this - awareness is an issue for startups, but most large companies continue to market. It is true that it is fairly easy to change the amount a company spends on marketing.
Either way, as the parent says - provided the investors understand it there is nothing weird about doing it this way.
(To explain: It's basically saying they are spending $X now to get them as a customer which will yield a lifetime value which is some multiple of $X. That's a very valid thing to do - see the whole field of cohort analysis for SAAS)
If the marketing and promotions and discounts stopped tomorrow, that revenue will drop.
On top of that, oil wells decline, slowly but surely, just like... customers churn.
If you spend $100 mill on sales and marketing and get zero customers, I'd agree it should expensed. If you get a bunch of customers, it's hard to argue against the capex treatment idea.
They were first on a few things but the tell is the coherence of the thinking traces of Claude. You have to put a loss on that. GPT 5 series thinking traces are creepy, Gemini thinking traces are disturbing. They both represent forced discontinuities on the policy gradient.
Claude is good at tool use because it's gigantic and well-labeled, but the reason you pay the premium is for a thinking partner, not a tool user.
Claude Code is the cancer that will kill the patient, Boris is the the Kardashian version of Karpathy, with less business sense.
I am not sure I understand.
The API business throws a massive model that by definition can't be inferred efficiently because nothing can across 4 different compute substates, at a problem that DSv4 nails at or near 100% while leaving most of the actual unique value of Claude on the table.
Claude should be in your house and car and your kid's classroom and shit.
Having it write tail -n5?
That's because Anthropic's A-Team is Meta's C-Team. Hell, I fired some of their stars myself.
Considering just four years ago they were a research lab with hardly any revenue at all, and no corporate muscles for earning revenue, I think that is a very impressive number.
(Sure, they're losing a whole lot of money too. Same goes for almost every other hyper-growth company in the history of tech.)
Except it's not true. No one lost $38.5B in a year just to 'hyper-grow' or whatever it means. Uber accumulated ~$30B loss over a decade.
Edit: I read it wrong. The loss was mostly caused by one-time event[0]:
> Before OpenAI’s switch late last year to become a public benefit corporation, investors in the company received convertible interest rights rather than conventional equity. Under US accounting rules, those interests were treated as liabilities and periodically revalued as the company’s valuation increased.
It looks like that OpenAI is actually quite in line with other companies that lost money to grow.
[0]: https://www.ft.com/content/e15b0d7e-ff6b-4f16-ba7a-4068feddb...
Growth means some inefficiencies, but their expenses are largely around commodities like electricity and data centers not a sudden army of salespeople. They also got 150M 11 years ago and 1 billion 7 year ago, they where quite large in 2022.
Basically you don’t get better at writing checks to your local utility which limits how much they can control costs.
I had to look that up, you're talking about investment there, not earned revenue.
The 150M was their initial funding (actually 130M I think https://www.clay.com/dossier/openai-funding)
The 1B was from Microsoft in 2019: https://openai.com/index/microsoft-invests-in-and-partners-w...
In 2022 they only had 335 employees (according to various internet searches but I can't find an original source for that number.) I can't find credible numbers for revenue from the GPT-3 API, which did have some usage - GitHub Copilot started charging a subscription fee on June 21, 2022 - https://github.blog/changelog/2022-06-21-github-copilot-is-n... - and that was running on the OpenAI Codex model so presumably OpenAI had some revenue from that.
That doesn't mean anything. There are examples to make both ways. E.g. WeWork
In the case of AI the marginal cost of the next token is not zero, and is in fact probably not going down much with volume, if at all.
So I'm not sure one can argue that scale will solve everything. It's very much like the old adage "we lose money on every sale, but make it up in volume".
No you don't.
Look at how a utlity works, in setting price specifically, for things that are considered a public good. The story is not about how much profit or revenue they make. Its about how do you keep it afloat and expanding in the coming year. Thats it.
They gave up on video because three separate Chinese companies were kicking their ass (and for cheaper).
Google has a better image model in the majority of cases. Much faster, too.
Claude Opus and Fable are like a billion times better. It's not even funny. Codex can't do Rust at all.
What does that leave them? Ads in ChatGPT? I've started to just rely on Google search blended with Gemini answers now because it's faster and doesn't spit out a 20-page essay of useless effusive prose.
Open source models will eat them from the bottom.
Will those enterprise contracts be renewed in a market full of alternatives?
There's nothing sticky about this company.
They're making a necklace with Jony Ive though, I guess?
Similarly, SpaceX has already brought the cost of getting things to space down by a couple of orders of magnitude, and Starship is rapidly progressing with the potential to bring them down a couple more. The aspirational goals there are being able to get things to space on the order of $10-$20/kg. That would dramatically reshape not only space but even transport as we know it, very likely in a way analogous to how the ability to quickly send a 0 or 1 signal long distances for cheap reshaped the world in ways that would be essentially impossible to predict prior to its happening.
I'm bearish on the LLM revolution and bullish on the space one, which generally seems to also be the market consensus.
.. who are they gonna sell to if people don't even have money to buy? We live in circular economy... everyone's dependent on someone or the other... you take one leg out of this, and the whole thing stops. UBI won't work either because it will lead to runaway inflation and extreme levels of invasive control over people's lives and what they can and cannot do.
I hope no one here is naive enough to believe that AI would actually be used for general welfare of people.
There is something that has fundamentally changed (or broken, depending on your perspective) with the valuation of American tech companies. They've always traded at a premium, but the pandemic and the encroachment of the monopolists has turned the earth sour.
You can debate the assumptions, but it isn't witchcraft. The math is simple.
If you limit yourself to simple math, than you get this result.
Assuming linear growth into a market with competition and an unclear ability to absorb that growth is a gamble.
How many serious, large AI players are there? Google, OpenAI, Anthropic, and who else exactly?
At least one of them will probably win. And winning here means billing almost all companies for AI and automation, consumers, perhaps robotics and research.. and that potential earning is massive.
So yes, I will pay 10 times the worth for the stock now, but paying 1000 per stock for a chance of owning all that future profit is not that outrageous.
At least that's what I remember from the 00s.
Enterprises are becoming increasingly aware that the best models can be used for planning and then cheaper models for execution - all the way to local models for some tasks.
Add in increasing competition from Chinese models… I’m not convinced this revenue growth is guaranteed.
That seems unlikely.
building a Rube Goldberg machine on Chinese models might work okay, but it will be brittle, and is unlikely to work as well as the latest and greatest model from OpenAI
the demand for intelligence is nearly limitless
But without labor the entire economy also collapses into a singularity beyond which nothing really makes sense anymore, so there's that.
A year ago, even 6 months ago, folks would have been still hypnotized by the hype and they would have pulled it off. Today too many people see a burning ship of cash and no moat to justify the burn. The story just isn’t there anymore.
> Revenue: $13.07 billion
> Cost of Revenue: $7.5 billion
In other words generating tokens is actually a profitable business even for the frontier models. It's best to IPO when it's the case.
[0]: https://www.ft.com/content/e15b0d7e-ff6b-4f16-ba7a-4068feddb... [1]: https://www.wheresyoured.at/exclusive-openai-financials/
The big AI IPOs this year will mark the high point in the bubble IMO, with retail FOMO ensuring that they pop like SpaceX has.
After that I expect them to crater, just like all those Spacs and Blockchain startups.
I wish I could believe this but lighting giant stacks of cash on fire is, unfortunately, no longer a disqualifying event for tulip buyers.
I wouldn't bet they will have a successful IPO, but I also wouldn't bet they won't, it will be almost entirely vibes based at time of launch.
> A person familiar with the matter said the large majority of that jump reflected a non-cash accounting charge linked to the company’s previous structure rather than its underlying operations.
> Before OpenAI’s switch late last year to become a public benefit corporation, investors in the company received convertible interest rights rather than conventional equity. Under US accounting rules, those interests were treated as liabilities and periodically revalued as the company’s valuation increased.
> As OpenAI’s worth rose, the increased value of those investor rights created a roughly $30bn charge, added the person. The charge is not expected to recur following the restructuring, they said.
> Stripping out the charge and other non-cash expenses, such as stock-based compensation of staff and computing credits from Microsoft, OpenAI’s losses were $8bn, according to the person.
https://archive.is/wIzZV#selection-1887.0-1890.0
It's not an issue if you're tracking the cash flow of the business or it's overall viability regardless of ownership structure. These book losses are just recognizing that the business has a higher market value so their ownership dilution commitments reduce the present value of the company more.
https://arstechnica.com/ai/2026/06/leaked-financial-docs-sho...
And I believe this is the actual source
https://www.wheresyoured.at/exclusive-openai-financials/
UPDATE: Also bad news, you need to let go of all of sales and marketing and G&A. And THEN it's a 50% margin business.
Unless they increased their spending even more, "all they have to do" is cover 2025 with the 2026 revenue?
Huh? Where did $30 billion go?
They might not have spent $30b but they likely valued their asset base at >>> $30b+ and had to adjust that at the time of converting to for profit, is how I read it.
“One time non-recurring” is also just accounting double speak that lets executives cover up dumb stuff while sounding plausibly OK.
Given that, no, this question is still open.
You can just run his content through AI to get a more balanced flash take. Example:
> Zitron repeatedly describes OpenAI as having "removed" costs — $3.74B in 2024, $17.87B and $3.95B in 2025 — via "net loss attributable to noncontrolling members capital," and says "it's unclear what this means." This is standard consolidated-statement mechanics, not a maneuver. When a parent consolidates entities it doesn't wholly own, the slice of losses belonging to other equity holders is split out as "noncontrolling interests." Nothing is removed or hidden; the total loss is unchanged, it's just allocated. Framing it as OpenAI "lowering" its loss "by removing costs" implies something sketchy where there's only routine GAAP. Saying "I will not speculate further" while leaving that insinuation hanging is the rhetorically convenient version of restraint.
For what it's worth, I think AI is a "bubble" and am not convinced at the long-term sustainability or viability of many of these companies but that doesn't mean that every armchair critic actually has the financial expertise to make accurate arguments.
I mean, his whole sensationalized 8X headline is based on a non-cash conversion charge, which is literally the biggest straw man you can find in the financials. He chose it because he's editorializing even as he leads his post with "I am not going to do very much editorializing". Hilarious.
and 7.81 billion in R&D from last year. I don't know how long it took to build the weights for the current model, or exactly how much that costs, but it's certainly more than zero days and zero dollars.
I also doubt that OpenAI could set that R&D expense to zero and survive without an agreement from Anthropic that they'll do the same... so that R&D expense can't be ignored when figuring up the total cost of the current model.
R&D is a leading expense, a good portion of that is probably R&D for 2026 models
To answer that question you have to take into account the cost to produce the thing that inference uses. If you don't, then that's like claiming that the total cost of a car is the cost to keep it on a dealer's lot until it's sold.
"Figuring out how much R&D adds to the total cost of a thing" absolutely isn't a new problem. And given that models seem to get supplanted every year, it's not like you're gonna be able to spread those R&D costs out very much.
Let's take another example: If OpenAI grows to 10 times their current size and continue spending the same amount on research and development they would be profitable today without any other changes to their organizational structure.
This is shaping up to be a relatively good investment compared to a lot of other companies that have IPO'd in the ~2010 era, the only reason why it looks bad because the numbers are just insane.
So I don’t see a company in immediate danger of collapsing, but I also don’t see a great investment at that valuation.
They would show a profit for 1 year and then become completely irrelevant.
The stock market has companies from massive to tiny. Each investor has the right to choose whether or not to invest in any one company. Some might be best served by investing only in profitable blue chips. For others, investing in IPOs is appropriate.
Your ire might be better directed at index companies who change seasoning rules right before a big IPO forcing unsuspecting investors to invest in unsuitable companies. And kudos to indexers like S&P who do not change the rules.
The other side of this are companies like Uber where (if we go by your logic), the public markets made a killing betting on a company that had massive losses. Should Uber also be blocked from an IPO even though objectively it turned out great?
Investing and markets will always decide between risk and reward. The risk of OpenAI is that it will never find profitablity but the potential rewards outweigh that in the current market perception.
In fact, the argument kind of shifts here, OpenAI can afford to IPO at this condition and still expect strong subscription precisely because its OpenAI. If it was some idk cooking appliance company with no exponential future payoff, the market would laugh and reject that IPO.
They can do that to OpenAI too but all signs say they wouldn't. You can still short the stock once it hits public if you really believe in the downfall of OAI in the future.
They have to apply the rules consistently otherwise it wont make any sense to have these indicies right? Spacex got rejected in one of the big indicies because it was not profitable while it got accepted in another. You can buy from both as an investor or a fund manager. If you think one of them is wrong, it is in your interest to switch. If you don't switch then you indirectly don't see anything wrong with it.
Going back to the point, if we want a free market, it has to be free for all. Spacex can go to 0 tomorrow and cause markets to implode, it can also surge 10x over the next 5 years causing everyone in the market to get richer or it can just drag for 10s of years in the same level.
But you and I do not know the future. We cannot block a company from IPOing just because we think it will fail in the future. If it meets all the existing regs, it should be allowed to IPO. If you want to change the regs, thats a different discussion but one i fundamentally disagree with personally. I think the market should be able to take risks and explore potential otherwise we will stagnate.
They could have existed indefinitely as a service layer that was reliant on other companies feeling charitable, like Firefox, but they also wanted to get rich.
Current investors should be left holding this shit bag, better them than retirement funds.
not sure where this constant dooming comes from
Does training of new models go into RnD or cost? And subscription plans' subsidies, are those cost or sales and marketing?
Pretty likely R&D, but obviously would need to be confirmed by OpenAI.
The original reporting includes this:
> The documents revealed how much OpenAI paid Microsoft for services. In the 2025 calendar year, OpenAI paid Microsoft $10.59 billion for “Research and development” expenses. We believe this most likely refers to the cost of training OpenAI’s models.
https://www.wheresyoured.at/exclusive-openai-financials/
Given the enormous cost of training, would it be worth training new models then?
I'm not an expert, but is this even an option? I mean models must be refreshed with latest knowldge base periodically even without algo/design improvements, otherwise the lag become too noticeable and it will hurt users and their use-case.
Can't really think of anything else he's been right about, though. I don't think "right" is what he's going for anyway, it's all about that validation and a coherent, testable hypothesis takes a very distant second place.
At that point however open weight model providers will start to shine. All eyes on China.
They are leading the way
How the hell did they spend 5.7 billion in "sales and marketing"?
If this can be trusted, they are selling $1 for ~95 cents, and are spending $3 on R&D. This is... Not an unsustainable business model as long as the money keeps flowing.
OpenAI is selling $1 for $2 and spending ~$5 to make that happen. The question is if they get to selling $1 for $2 long enough to make they're investment back.
The better question is what will that $38B of R&D spending get.
The only thing any of them are losing money on is the 200$ a month plans, and you betchya that they're moving as many enterprises to per token pricing as possible rapidly.
If you're not investing in these companies when they IPO and ideally before that if you are lucky enough to be rich, you deserve to not reap what you didn't sow.