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>It took Amazon around six to seven years to see its first profitable quarter, A key difference from OpenAI is that Amazon was cash flow positive from very ea

by jasode 2y ago

>It took Amazon around six to seven years to see its first profitable quarter, A key difference from OpenAI is that Amazon was cash flow positive from very early on and before that first profitable quarter. They only needed one funding round Series A of $8 million instead of repeatedly trying to raise extra rounds of funding from new VC investors. The Amazon startup already had enough free cash from operations to internally fund their warehouse expansions. The "Amazon had no profits" was an accounting side-effect because of re-investment. Anybody seriously studying Amazon's financial statements in the late 1990s would have paid more attention to their cash flow rather than "accounting profits". On the other hand, OpenAI doesn't have the same positive cash flow situation as early Amazon. They are truly burning more money than they take in. They have to get billions from new investors to buy GPUs and pay salaries. ($40 billion raised in latest investment round.) They are cash flow negative. The cash flow from ChatGPT subscription fees is not enough to internally fund their growth. [1] https://en.wikipedia.org/wiki/Free_cash_flow https://en.wikipedia.org/wiki/Free_cash_flow

nl 2y ago
Amazon was founded in 1995 and became cash flow positive in 2002[1], seven years later. ChatGPT was released in Nov 2022. They are expecting $12B in revenue this year[2]. [1] https://adainsights.com/blog/when-did-amazon-start-making-money https://adainsights.com/blog/when-did-amazon-start-making-mo... [2] https://www.cnbc.com/2025/03/26/openai-expects-revenue-will-triple-to-12point7-billion-this-year-sources-say.html https://www.cnbc.com/2025/03/26/openai-expects-revenue-will-...
- jasode 2y ago
  >Amazon was founded in 1995 and became cash flow positive in 2002[1], seven years later. Thank you for the correction. My memory was faulty and Jeff Bezos actually said, "we always had positive gross margins". Deep link: https://www.youtube.com/watch?v=zN1PyNwjHpc&t=36m11s https://www.youtube.com/watch?v=zN1PyNwjHpc&t=36m11s The positive gross margins allowed enough discretionary use of cash to take out loans and service that debt. I just looked at the 1998 10k filing and the page on "Consolidated Statements of Cash Flows" has "Net cash provided by (used in) operating activities" of positive $31 million compared to negative -$6 million in 1996.
  - nl 2y ago
    The use of debt vs capital is interesting, but one isn't clearly better than the other. You can look at OpenAI's revenue as allowing them to raise investment capital. To invest in OpenAI is to bet that they won't need to keep investing more in hardware than they bring in. To me that doesn't seem a sure thing, but it isn't obviously wrong either. They are growing revenue very quickly and already have significant cashflow, and it isn't clear to me that they'll need to sustain the CapEx forever.

by jasode 2y ago

nl 2y ago

Amazon was founded in 1995 and became cash flow positive in 2002[1], seven years later. ChatGPT was released in Nov 2022. They are expecting $12B in revenue this year[2]. [1] https://adainsights.com/blog/when-did-amazon-start-making-money https://adainsights.com/blog/when-did-amazon-start-making-mo... [2] https://www.cnbc.com/2025/03/26/openai-expects-revenue-will-triple-to-12point7-billion-this-year-sources-say.html https://www.cnbc.com/2025/03/26/openai-expects-revenue-will-...

jasode 2y ago
>Amazon was founded in 1995 and became cash flow positive in 2002[1], seven years later. Thank you for the correction. My memory was faulty and Jeff Bezos actually said, "we always had positive gross margins". Deep link: https://www.youtube.com/watch?v=zN1PyNwjHpc&t=36m11s https://www.youtube.com/watch?v=zN1PyNwjHpc&t=36m11s The positive gross margins allowed enough discretionary use of cash to take out loans and service that debt. I just looked at the 1998 10k filing and the page on "Consolidated Statements of Cash Flows" has "Net cash provided by (used in) operating activities" of positive $31 million compared to negative -$6 million in 1996.
- nl 2y ago
  The use of debt vs capital is interesting, but one isn't clearly better than the other. You can look at OpenAI's revenue as allowing them to raise investment capital. To invest in OpenAI is to bet that they won't need to keep investing more in hardware than they bring in. To me that doesn't seem a sure thing, but it isn't obviously wrong either. They are growing revenue very quickly and already have significant cashflow, and it isn't clear to me that they'll need to sustain the CapEx forever.