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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
by nl 4mo ago
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.
- vkou 4mo agoSales and marketing have to be added to the COR, which makes COR slightly > Revenue.
- gamblor956 4mo agoThat's only true once they become public. As a private entity they can calculate COR any reasonable way that their investors are okay with. (For tax purposes for most businesses it doesn't matter whether an expense is CORS or not.)
- nl 4mo agoTo 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.
- claw-el 4mo agoFor 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?
- danielmarkbruce 4mo agoNo, 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.
- vkou 4mo agoAn oil well doesn't disappear once you put it in the ground (The oil might). If the marketing and promotions and discounts stopped tomorrow, that revenue will drop.
- otterley 4mo agoBrand 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.
- danielmarkbruce 4mo agoIf 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.
- nl 4mo agoPage 6 of Google's 10K statement to the SEC[1] they are separate items. The line items are: Cost of revenues Research and development Sales and marketing General and administrative Take it up with the SEC I guess? [1] https://s206.q4cdn.com/479360582/files/doc_financials/2026/q1/GOOG-10-Q-Q1-2026.pdf https://s206.q4cdn.com/479360582/files/doc_financials/2026/q...
- vkou 4mo agoI'm not saying that the SEC is stupid. They have a consistent way that they expect a corporation to do their books. But for all practical intents and purposes, you can't just fire all your sales people and shut off your marketing firehose, and stop giving discounts, and expect revenue to remain steady in either the short, or the long-term. You can shut down your R&D, and it will remain steady, at least in the short term. I am clearly mincing terms that mean specific things, and I'm very sorry to do so. I am simply trying to communicate that generally speaking, OpenAI is currently spending ~$1.05 to make a dollar, and is also on top of that, spending ~$3.00 in R&D. Now, I do think that it's likely that they can increase their prices to close that 5-cent gap.
- HWR_14 4mo agoCOR is a GAAP concept.
- gamblor956 4mo agoCOR is an accounting concept, and GAAP does not dictate what has to go into COR because that is industry specific. (Though in that sense, the industry-specific practices determine GAAP for that industry.)
- danielmarkbruce 4mo agoNo, public companies do not include sales and marketing as cost of revenue.
- danielmarkbruce 4mo agoNo, no they do not. Those are operating expenses. This is accounting 101.
- hparadiz 4mo agoIt's wild how basic math goes poof as soon as someone has an agenda to push in internet comment threads.
- danielmarkbruce 4mo agoThe 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.
- mrcwinn 4mo agoThat’s not how that works.
- reinitctxoffset 4mo agoAnthropic 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.
- locusofself 4mo agoYou lost me in the last sentence there. What do you mean?
- reinitctxoffset 4mo agoYou and another commenter asked the same question at the same time, it's more honest to link the one reply than to paste it: https://news.ycombinator.com/item?id=48566097 https://news.ycombinator.com/item?id=48566097
- ElFitz 4mo ago> 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.
- reinitctxoffset 4mo agoUsing 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.
- rvz 4mo agoImagine 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.
- w29UiIm2Xz 4mo agoWhat's the adage, it is difficult to get a man to understand something, when his salary depends upon his not understanding it
- nl 4mo agoMy salary is in no way dependent on OpenAI or Anthropic (in fact I could probably get more money if we switched to using open models and they were just as capable).
- LeFantome 4mo agoLooking forward to GLM-5.2 in OpenCode. But a lot of other people are going to happily shell out for Opus 4.8 at way higher prices.
- Daviey 4mo agoBeen using GLM-5.2 in OpenCode since Saturday, what are you waiting for?
- SyneRyder 4mo agoI think it's out now - or do you mean as part of the Zen subscription? The API GLM 5.2 launched last night with several providers on OpenRouter. I had a short conversation, didn't get to test much, but initial impressions "the vibes were good".
- psv2522 4mo agoI think op is on the go sub, i m on the same we have glm5.1 but dont see glm5.2 yet
- 4mo ago
- surgical_fire 4mo ago> Revenue is higher than cost of revenue and revenue is growing faster than cost of revenue. That's not necessarily true. It depends on two things that are impossible to derive from the leaked numbers: 1 - How much of their compute costs are subsidized. 2 - How much of that R&D chunk can actually be reduced for the company to continue working. What goes into "R&D"? Is that only things such as training for new models? This is impossible to determine from those numbers alone. If those numbers are true, they would not be "close to profitability". They would be profitable, period. This does not explain why they need to raise money like crazy. It would be possible to train new models at a more sustainable pace without the need to jack up prices at all, only with the difference in between "Revenue minus Cost of Revenue". They also wouldn't need to be on a mad race to IPO and dump this into the public market. To be frank, the more I look at those numbers, the more I think this is completely unsustainable.
- disgruntledphd2 4mo ago> Is that only things such as training for new models? It feels like cost of revenue should account for training, but I'm not an accountant so who knows?
- surgical_fire 4mo agoI'm not even entirely sure of this. Obviously you need new training rounds over time. Knowledge is not static. New things that are created would need to be part of later models. How do you account for that? Do you account for some sort of model depreciation? A lot of things are very nebulous in those leaked numbers. How is "cost of revenue" considered? If Microsoft, Oracle and such provides computing at a loss to Open AI, that is clearly not sustainable, and it is a way to pretend the numbers are better than they actually are prior to an IPO. This might even be a source of pressure for an IPO. As losses accumulate in the ecosystem, they need to dump it into the public so they can bring the numbers to reality. Also, I am not sure if they own any compute (for example, the Stargate datacenters). If they do, do they lump the costs of building those data centers all in "R&D"? That would be one hell of a way to pretend that inference is cheaper, good luck having inference without those datacenters. The more I look at this, the more it looks like "OpenAI is profitable when you pretend they have no costs".