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Depends on what their actual costs are. Either they are losing lots of money on subscriptions, or they make absolute bank on API pricing. Looking at the pricin

Depends on what their actual costs are. Either they are losing lots of money on subscriptions, or they make absolute bank on API pricing. Looking at the pricing of 1-2T models like Kimi or DeepSeek on the open market, I'm tempted to assume that inference costs are closer to subscription pricing than to API pricing. Especially considering that subscriptions a) distribute load over time via rate limits, and b) will include a lot of users who get only a fraction of the possible value, whether they are on a personal account where they are on the rate limit on the weekend but barely use it during the week, or are corporate users who were issued an account they rarely use. Subscription prices are usually measured on the average case, not the most extreme value a power user can get out of it

Forgeties79 5mo ago
Considering not one company is in the black yet I don’t really know how we can say anyone is making bank, unless we want to count absurd levels of VC funding (now slowing down) I guess.
- wongarsu 5mo ago
  I am conveniently not counting training costs (since they add no marginal costs, selling more tokens doesn't impact them), and hardware and DC costs only amortized Of course they do have to "make bank" in some way to offset the insane training costs. But whether they go for high prices or high volume, or offer some services as a loss leader to drive profits elsewhere is somewhat orthogonal to that
- anthonypasq 5mo ago
  https://www.wsj.com/tech/ai/mind-blowing-growth-is-about-to-propel-anthropic-into-its-first-profitable-quarter-7edbf2f4 https://www.wsj.com/tech/ai/mind-blowing-growth-is-about-to-...
  - Forgeties79 5mo ago
    Let’s see it first. And without omitting training/infrastructure costs at that. Until then my comment is still accurate.
    - anthonypasq 5mo ago
      its a private company, what exactly do you expect to 'see'?
      - Forgeties79 5mo ago
        Anthropic IPO's in less than 5 months and I guarantee you any company that officially is in the black will proudly shout it from the rooftops.
        anthonypasq 5mo ago
        > Anthropic IPO's in less than 5 months pure speculation. about as valuable as my linked wsj reporting i suppose. given thats the case, maybe you shouldnt claim so confidently that they are money incinerators.
        Forgeties79 5mo ago
        “pure speculation” is a bit unfair. Back to the point: No one is profitable yet, which I think we both agree is accurate. If you are going to lean on “they will be soon” then it’s fair to say they’re going to IPO soon. Ease off the gas. We’re just discussing a tech company.
  - dminik 5mo ago
    Does Anthropic really expect to double their income without also doubling their expenses?
    - Forgeties79 5mo ago
      I’ve been hearing that anthropic is on the verge of profitability for probably a year straight. Until all the companies agree to stop the training arms race I just don’t see how it’s in the cards
    - i2km 5mo ago
      This is one of the things people miss. If they double their customers, of course they double their expenses. Unlike SW, the marginal cost here is still high
      - dminik 5mo ago
        I mean, it's possible that with the new datacenter from SpaceX, they could onboard more users than it costs them to rent. That's fair. But I kind of doubt that. One thing that really stinks to me is that various AI boosters have been claiming insane profit margins (40%, 50%, ...), yet apparently Anthropic stands to (possibly) make $500M profit on $11B in expenses, that's clearly nowhere near 50%. Not to mention that they're not making profit on inference now. So where do people get this confidence to pull random numbers from?
    - wongarsu 5mo ago
      There we go back to the original question: are subscriptions profitable, API pricing wildly profitable, and they just lose all that money on fixed costs like model training; or do they actually barely make money on inference? That's why talking about the profitability of inference without accounting for model training is interesting, because that is the deciding factor in whether more customers would help getting them in the green
      - dminik 5mo ago
        Without actual data I don't know. My gut feeling is that they overall lose money on subscriptions (and especially the free tier that accounts for 95% of all users). And make thin profit (~5%) on API pricing. But it's just that. A gut feeling.
runtime_terror 5mo ago
> I'm tempted to assume that inference costs are closer to subscription pricing than to API pricing So just going on vibes? While some people don't like his content, Ed Zitron shows a lot of evidence for your assumption being very wrong. These companies are bleeding cash at ungodly rates. It's likely their API pricing is still subsidized if you look at their overall financial picture. Related, there's a good reason those API prices keep going up a lot every new version and it's not just because the models are better.
- wongarsu 5mo ago
  Selling inference for more than inference costs is not incompatible with bleeding cash at ungodly rates. They do in fact pay ungodly amounts of cash for other things, like training, marketing, etc. Heck, you can bleed cash while being profitable (in the accounting sense) Also, API prices going up a lot every new version is more an OpenAI thing, and even there it's a recent trend: GPT 5.0 was a big price drop compared to 4.1, and 4.1 was cheaper than 4o, which itself got a price cut at some point and is cheaper than 4. Meanwhile Anthropic's API pricing stayed stable for many versions, then got slashed to a third with the 4.2 release and have stayed at that level since.
  - runtime_terror 5mo ago
    But explain to me how these companies will recoup these costs outside of increasing inference pricing? Their business model is selling inference but the training and other costs have to be accounted for somehow. Unless I'm missing something obvious, inference costs must go up drastically if these companies are going to survive beyond the subsidy stage.
    - wongarsu 5mo ago
      Sell more. The hope is that there is a huge addressable market that includes huge per-worker demand in almost all white collar work and lots of inference in people's private lives If that doesn't work, then yes, then prices will have to go up

Forgeties79 5mo ago

Considering not one company is in the black yet I don’t really know how we can say anyone is making bank, unless we want to count absurd levels of VC funding (now slowing down) I guess.

wongarsu 5mo ago
I am conveniently not counting training costs (since they add no marginal costs, selling more tokens doesn't impact them), and hardware and DC costs only amortized Of course they do have to "make bank" in some way to offset the insane training costs. But whether they go for high prices or high volume, or offer some services as a loss leader to drive profits elsewhere is somewhat orthogonal to that
anthonypasq 5mo ago
https://www.wsj.com/tech/ai/mind-blowing-growth-is-about-to-propel-anthropic-into-its-first-profitable-quarter-7edbf2f4 https://www.wsj.com/tech/ai/mind-blowing-growth-is-about-to-...
- Forgeties79 5mo ago
  Let’s see it first. And without omitting training/infrastructure costs at that. Until then my comment is still accurate.
  - anthonypasq 5mo ago
    its a private company, what exactly do you expect to 'see'?
    - Forgeties79 5mo ago
      Anthropic IPO's in less than 5 months and I guarantee you any company that officially is in the black will proudly shout it from the rooftops.
      - anthonypasq 5mo ago
        > Anthropic IPO's in less than 5 months pure speculation. about as valuable as my linked wsj reporting i suppose. given thats the case, maybe you shouldnt claim so confidently that they are money incinerators.
        Forgeties79 5mo ago
        “pure speculation” is a bit unfair. Back to the point: No one is profitable yet, which I think we both agree is accurate. If you are going to lean on “they will be soon” then it’s fair to say they’re going to IPO soon. Ease off the gas. We’re just discussing a tech company.
- dminik 5mo ago
  Does Anthropic really expect to double their income without also doubling their expenses?
  - Forgeties79 5mo ago
    I’ve been hearing that anthropic is on the verge of profitability for probably a year straight. Until all the companies agree to stop the training arms race I just don’t see how it’s in the cards
  - i2km 5mo ago
    This is one of the things people miss. If they double their customers, of course they double their expenses. Unlike SW, the marginal cost here is still high
    - dminik 5mo ago
      I mean, it's possible that with the new datacenter from SpaceX, they could onboard more users than it costs them to rent. That's fair. But I kind of doubt that. One thing that really stinks to me is that various AI boosters have been claiming insane profit margins (40%, 50%, ...), yet apparently Anthropic stands to (possibly) make $500M profit on $11B in expenses, that's clearly nowhere near 50%. Not to mention that they're not making profit on inference now. So where do people get this confidence to pull random numbers from?
  - wongarsu 5mo ago
    There we go back to the original question: are subscriptions profitable, API pricing wildly profitable, and they just lose all that money on fixed costs like model training; or do they actually barely make money on inference? That's why talking about the profitability of inference without accounting for model training is interesting, because that is the deciding factor in whether more customers would help getting them in the green
    - dminik 5mo ago
      Without actual data I don't know. My gut feeling is that they overall lose money on subscriptions (and especially the free tier that accounts for 95% of all users). And make thin profit (~5%) on API pricing. But it's just that. A gut feeling.

runtime_terror 5mo ago

> I'm tempted to assume that inference costs are closer to subscription pricing than to API pricing So just going on vibes? While some people don't like his content, Ed Zitron shows a lot of evidence for your assumption being very wrong. These companies are bleeding cash at ungodly rates. It's likely their API pricing is still subsidized if you look at their overall financial picture. Related, there's a good reason those API prices keep going up a lot every new version and it's not just because the models are better.

wongarsu 5mo ago
Selling inference for more than inference costs is not incompatible with bleeding cash at ungodly rates. They do in fact pay ungodly amounts of cash for other things, like training, marketing, etc. Heck, you can bleed cash while being profitable (in the accounting sense) Also, API prices going up a lot every new version is more an OpenAI thing, and even there it's a recent trend: GPT 5.0 was a big price drop compared to 4.1, and 4.1 was cheaper than 4o, which itself got a price cut at some point and is cheaper than 4. Meanwhile Anthropic's API pricing stayed stable for many versions, then got slashed to a third with the 4.2 release and have stayed at that level since.
- runtime_terror 5mo ago
  But explain to me how these companies will recoup these costs outside of increasing inference pricing? Their business model is selling inference but the training and other costs have to be accounted for somehow. Unless I'm missing something obvious, inference costs must go up drastically if these companies are going to survive beyond the subsidy stage.
  - wongarsu 5mo ago
    Sell more. The hope is that there is a huge addressable market that includes huge per-worker demand in almost all white collar work and lots of inference in people's private lives If that doesn't work, then yes, then prices will have to go up