Whether it can physically be as all encompassing as it makes itself out to be or whether it will just be healthily profitable remains to be seen. Kind of like how Uber went from "We'll autonomously drive the world" to "Look, we deliver food, goods, and people to locations and we figured out how to do that in a way that makes profits. Also, ads".
What is counted as R&D is completely arbitrary. These figures are just playing accounting games to attempt to hide the massive ongoing costs.
We’ll see a little better when they IPO and are forced to attempt to make money but I wouldn’t invest in this business.
After this supposedly being the reveal for his bubble-bursting massive revelation that will send the industry flying and lead to journalists kicking in his door for interview requests and exposés, I think... well, not that anymore. I thought "the frontier labs are losing money" was rather universally understood, and this really isn't even as bad as the stuff that's publicly visible; the fact that they keep raising hundreds of billions of dollars that they'll one day supposedly be required to show returns on?
I mean, the fact that lots of expenses are not scaling with revenue (sales and marketing 5xed versus revenue 3xing) and that the losses are very very large is important. More importantly, these are audited figures which haven't been seen before.
The people who are completely sold on the belief that AI providers are running at a profit believe him to be utterly, totally and completely wrong in every one of his predictions.
The people who are completely sold on the belief that AI providers are running at a loss they can never recover from believe him to be utterly, totally and completely correct in every one of his predictions.
The reality is that it's not his predictions that matter, but his data, which is almost always correct as of time of writing. If you ignore his opinions, the data presented on liabilities, spend, revenue, loans, commitments, etc across Coreweave, Stargate, Oracle and all of the usual AI companies is, as far as I can tell, correct.
IOW, when it comes to his opinions, it's all about your priors. His data is good, though.
I think the question is more about whether people believe this is a sound business in the long term, which imo isn't possible to tell based on these numbers yet.
Yeah, I think that he does well with sources and data. I also think that his editorialising can be off-putting for lots of people. I kinda enjoy it, but accept that I have niche tastes.
He's not even good at that, here's him not understanding what ARR means and fumbling a simple calculation and refusing to fix it.
https://x.com/binarybits/status/2031392856401666362
Not only not understanding ARR, he simply doesn't do data analysis properly - he misses some few months and days in his calculation to prop up his point. This is a mistake chatgpt would have caught.
Do you have a link to his blog where he gets the ARR wrong?
True, I haven't much of his posts, but the one or two I recall reading with ARR in it didn't seem to have fumbled the calculations.
Can you share me the official meaning of ARR? Preferably on a GAAP basis. Should be no problem, right?
This is an impossible ask unless one works at Uber. I can tell you that i saw how much they were spending on ads back in 2016, and how long it continued and can assure you that they were 100% losing money back then.
Like, even now their margin is around 10% (they made 5bn on 50bn of revenue). Other software companies make a much, much, much better margin because Uber is basically not a real software business, it's an app attached to a low-margin delivery business.
It's not going to happen.
So everything else is kind of academic. Of course they were losing money in 2025, they had a technology that was kind of cool - clearly eventually going to deliver something great, but they didn't actually have anything somebody should pay for. Now they have a thing that people will pay for. So who cares what they lost in 2025?
So what's important today is - how competitive are they with Anthropic in delivering that product. How do the economics of companies using AI agents for coding work. That's all. I don't think there's really an argument about them losing money on inference any more.
Operating loss went from ~$8.8B to ~$20.9B — roughly 2.4x.
Doesn't seem like a domesday scenario.
Ceteris paribus, those figures imply a $45bn loss this year, $90bn loss next year and $110bn loss in 2028 before breakeven in 2029.
That's $250bn of losses to be financed from 2026 onwards. (They raised ~$120bn, $25bn up front and the rest based on milestones. So Another ~$125bn uncovered.) That only works if OpenAI stays a fundraising darling. So not a doomsday sceanario. But perilous, and dependent on short-term trends extending into long-term curves.
> Operating loss went from ~$8.8B to ~$20.9B — roughly 2.4x.
> Doesn't seem like a domesday scenario.
Those two lines are moving up and to the right, but are not parallel.
It all depends on where those two lines meet (the break-even point): too far in the future and the company will be dead anyway. Almost all companies will eventually be profitable; the problem is that the majority of them will need constant cash injections to keep the lights on.
Like the old aviation saying: even a brick will fly if it has enough thrust. doesn't make the brick a plane, though.
I do wonder if this comparison is really meaningful. It looks like if they can grow infinitely, then at some point they should be profitable. However, that's already a somewhat sad story ("in the limit as x->inf, we'll actually _make_ money!"). And there are of course limitations. Anthropic, Google, open models etc are all real competitors, and it seems to me that there will only be one winner. If openAI is losing money faster than the others, then it may not survive long enough to reach that eventual profitability. And finally, the human population is limited. There isn't a true infinity that the pattern can extend to. If we've only reached 10% of the TAM that's fine, but if we're at like 70% (which personally I suspect is about right), then this looks bad.
Ads, maybe, but not only are they already walking back recent price hikes, the paying customers were hitting the brakes even on the original price.
Note that this data you see (their increased revenue) came from a period where they were onboarding customers who were competing to see who used the most tokens.
IOW, this is the best-case scenario for them - customers with no cap on token spend.
But... the caps from customers came in before they hiked prices. Then they hiked prices. That resulted in a short-term boost to revenue to compensate for the caps. Now they are talking about walking back those hikes. That means they are going to find an equilibrium lower than their best-case scenario.
When I read "the worst possible thing for me to get" I had assumed it would be evidence that inference/Codex is fundamentally unprofitable (as Ed often blogs about) but there isn't enough information here to support that argument either: revenue is still greater than cost of revenue, and the major losses are clearly delineated.
That ship has sailed long ago into the IPO sunset.
People ignore all his horrendous takes from last year and still eat this years “analyses” like it’s Gods words.
He has been predicting the doom for years and years now and it is strange to see HN still putting credence here.
This is what he said around a week back
“ One of my sources has come forward and brought me a story that will possibly burst the AI bubble. The reason they brought this to me is that I’ve shown — and will continue to show — that I actually give a shit about this industry and the people in it.
If you’re wondering what the story is, know that it’s the information I’ve wanted for years, delivered as I have always wanted it, and I will treat it with the reverence it deserves. Imagine what the worst possible thing for me to get would be and you’re probably close.
I expect it to be out in the next two weeks, and you’ll know exactly when it runs. There’ll be a podcast and a newsletter, and very likely follow-on coverage elsewhere.
I can guarantee you it’ll be worth it, and you’ll be stunned by what I report.”
This is qanon tier stuff. He’s been pulling this shtick for a while and people still haven’t caught on.
No idea why his shit keeps getting submitted.