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OpenAI Losses Increased Nearly 8X in 2025, with Spending Hitting $34B

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Re: OpenAI Losses Increased Nearly 8X in 2025, with Spending Hitting $34B

#61

Post by disgruntledphd2 »

s1artibartfast wrote: post #60
disgruntledphd2 wrote: post #42

Earlier quoted context omitted.

> Share your evidence please. 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 r…

ads =/= rides

Yeah totally. In some ways Google and Facebook being so wildly profitable was very bad for future tech startups.

Nonetheless, that's the bar from a financial perspective, and I honestly don't think Uber has (or will) hit that bar.

Re: OpenAI Losses Increased Nearly 8X in 2025, with Spending Hitting $34B

#62

Post by disgruntledphd2 »

simianwords wrote: post #58
disgruntledphd2 wrote: post #56

Earlier quoted context omitted.

As a long time FT subscriber, I'm happy you're using them as a source. The Zitron details were more useful to me though. And none of my points have anything to do with the once off losses. I'm observing that a bunch of costs appear to be scaling with revenue or above revenue, which does not bode well for future profitability. Also, as an aside, stripping out equity grants is really misleading for a private, high grow…

The losses are scaling with revenue because increase in (expected) revenue increases valuation which increases compensation. Once expectation stabilises these losses won’t happen because the valuation will remain constant. A lot of people were paid really high equity grants simply because they started low. You can’t expect them to be paid the same amount each time. FT themselves point this out and who you believe is…

> The losses are scaling with revenue because increase in (expected) revenue increases valuation which increases compensation.

My original point around equity is that if you pay a substantial fraction of comp in this form, then leaving it out of expenses is pretty bizarre.

Is it your contention that the equity grants are the cause of their increasing losses?

I believe that this is probably not true at all, it's more likely to be S&M (salespeople scale as N not log(N) like engineering/product) particularly given that the product requires tuning for lots of companies (hence all the FDE hires).

More generally, the training costs seem to be increasing which is bad for their future profitability.

Re: OpenAI Losses Increased Nearly 8X in 2025, with Spending Hitting $34B

#63

Post by disgruntledphd2 »

simianwords wrote: post #59
disgruntledphd2 wrote: post #57

Earlier quoted context omitted.

That's the trouble I have with ARR, because there's no standard, people engage in shenanigans. I do find the 5bn lifetime revenue versus their ARR figures pretty sketchy which is why I really want to see the S1. Can you be more specific on his incorrect calculations please?

Wait. ARR has no precise definition but has a clear social understanding. It’s clear Ed doesn’t get that and ARR not having a clear definition doesn’t absolve him of the mistake. His misunderstanding was on a different axis. The miscalculations are pretty clearly pointed out in the tweet I linked earlier.

> Wait. ARR has no precise definition but has a clear social understanding.

This is (historically) a recipe for fraud and badness. If ARR is important enough to be reported, then there should be a GAAP definition.

Do you use calendar month or four week rolling? Do you account for seasonality? How do you recognise revenue? (My sense is that Anthropic do sketchy things with credits, as the consumer ones last for like 180 days and then expire).

ARR is a really, really, really easy metric to make sound like whatever you want which is why I am sceptical of it.

EDIT: I looked at the tweet which is a screenshot of a supposed sheet that Ed built. Unless you have a source for the sheet then I'll need to assign this relatively low credibility (don't know the user, it's a screenshot with no link).

Re: OpenAI Losses Increased Nearly 8X in 2025, with Spending Hitting $34B

#64

Post by lenkite »

simianwords wrote: post #21
Certhas wrote: post #19

Earlier quoted context omitted.

The Uber comparison makes no sense. This is the opposite situation. Uber lost money on rides, OpenAI is (possibly) making money on inference. Uber used an R+D moonshot to autonomous driving to justify capturing an established industry without reducing costs meaningfully. OpenAI has a core product that risks becoming a commodity with open source models only 6 months behind.

Uber didn’t lose money on rides other than some edge cases. What’s your source for this claim?

Uber kept fares artificially low while simultaneously paying high bonuses to drivers to build a massive network. After burning through roughly $30+ billion over its first decade, Uber then pivoted its business model by raising rider fares, increasing restaurant fees on Uber Eats, and cutting driver pay.

Basically, win market through subsidy -> establish monopoly -> increase price -> profit.

Re: OpenAI Losses Increased Nearly 8X in 2025, with Spending Hitting $34B

#65

Post by dogleash »

simianwords wrote: post #34
saberience wrote: post #31

Earlier quoted context omitted.

Yeah he has zero credentials and authority and an agenda to push. Not to mention most of his articles are financially and technically illiterate and full of mistakes and inaccuracies. No idea why his shit keeps getting submitted.

I think there's some fundamental thing in his writing that speaks to people -- they want AI to fail and they want a prophet to give them reasons to think so.

It's simpler than that, some people just like sardonic writing. I don't know if I believe Ed any more than some AI cheerleader. But his writing is proper relaxing compared to hype rants that I wouldn't blame someone for suspecting to be coke-fueled.

Re: OpenAI Losses Increased Nearly 8X in 2025, with Spending Hitting $34B

#66

Post by simianwords »

disgruntledphd2 wrote: post #63
simianwords wrote: post #59

Earlier quoted context omitted.

Wait. ARR has no precise definition but has a clear social understanding. It’s clear Ed doesn’t get that and ARR not having a clear definition doesn’t absolve him of the mistake. His misunderstanding was on a different axis. The miscalculations are pretty clearly pointed out in the tweet I linked earlier.

> Wait. ARR has no precise definition but has a clear social understanding. This is (historically) a recipe for fraud and badness. If ARR is important enough to be reported, then there should be a GAAP definition. Do you use calendar month or four week rolling? Do you account for seasonality? How do you recognise revenue? (My sense is that Anthropic do sketchy things with credits, as the consumer ones last for like 1…

> But I’m a curious little critter and went ahead and added up all of the times that Anthropic had talked about its annualized revenue from 2025 onward, and the results — which you can find with links here! — and based on my calculations, just using published annualized revenues gets us to $4.837 billion.

It’s here in the blog.

> This is (historically) a recipe for fraud and badness. If ARR is important enough to be reported, then there should be a GAAP definition.

This is orthogonal to Ed misunderstanding ARR.

Re: OpenAI Losses Increased Nearly 8X in 2025, with Spending Hitting $34B

#67

Post by simianwords »

disgruntledphd2 wrote: post #62
simianwords wrote: post #58

Earlier quoted context omitted.

The losses are scaling with revenue because increase in (expected) revenue increases valuation which increases compensation. Once expectation stabilises these losses won’t happen because the valuation will remain constant. A lot of people were paid really high equity grants simply because they started low. You can’t expect them to be paid the same amount each time. FT themselves point this out and who you believe is…

> The losses are scaling with revenue because increase in (expected) revenue increases valuation which increases compensation. My original point around equity is that if you pay a substantial fraction of comp in this form, then leaving it out of expenses is pretty bizarre. Is it your contention that the equity grants are the cause of their increasing losses? I believe that this is probably not true at all, it's more…

It’s not my contention, it’s FT’s conclusion.

Also it should be obvious that you shouldn’t extrapolate stock based compensation in a scale up. People make a one time bounty but that is not recurring obviously.

Re: OpenAI Losses Increased Nearly 8X in 2025, with Spending Hitting $34B

#68

Post by EmiDub »

nstart wrote: post #12

I'm a little confused here. Cost of revenue is lower than revenue. That's good. R&D is the main contributor to losses here and this seems normal in an industry like this. For OpenAI specifically, I think this is problematic. They were the first movers but despite the large R&D they've lost so much ground to Anthropic despite Anthropic seemingly gifting them with weird PR self owns. But if we were to extrapolate this…

> Cost of revenue is lower than revenue.

I’m not sure how people are looking at numbers that show, even if we wipe off the enormous R&D expenditures, they are still in the red for inference + sales/marketing + admin and responding “this seems positive”.

It’s like being a sold a car and being told “well if you ignore the fact it has no engine it’s a good buy” yet it also has no wheels.

> Unless there's an assumption that R&D costs have to forever go up in order to increase revenue, I feel like this shows that the AI industry is actually on a path to profitability in the long term.

There are three futures right, I’ll rank them in order of fantasy -

1. Someone achieves AGI. At that point the economics of an individual company don’t even matter.

2. R&D costs do have to forever continue, because LLMs can be continually iteratively improved. Much like chip development, there is no end in sight, at least not on a near term timescale. If you are not continually at the frontier, customers will use a competitor or open/local alternatives.

3. LLMs reach a plateau of functionality. Further gains are minimal, quality reaches the apex of what the technology permits. In this scenario the hyperscalers have no business because open/local models will rapidly reach that same plateau as well.

Re: OpenAI Losses Increased Nearly 8X in 2025, with Spending Hitting $34B

#69

Post by red-iron-pine »

lelanthran wrote: post #29
muglug wrote: post #4

Revenue went from $3.7B to $13.07B — roughly 3.5x. Operating loss went from ~$8.8B to ~$20.9B — roughly 2.4x. Doesn't seem like a domesday scenario.

> Revenue went from $3.7B to $13.07B — roughly 3.5x. > 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…

and again, there are good models racing right behind.

the brick has a lot of thrust but there is a airplane behind it, and it's moving on its own

Re: OpenAI Losses Increased Nearly 8X in 2025, with Spending Hitting $34B

#70

Post by red-iron-pine »

pinkmuffinere wrote: post #10
HlessClaudesman wrote: post #8

“I had a guaranteed military sale with ED 209, renovation program, spare parts for twenty-five years… Who cares if it worked or not?!?”

It's possible that I'm just not up to date with current news, but I'm having trouble connecting this quote to the article. Or really even understanding the quote at all. Can you elaborate?

dystopian robocop reference
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