Anthropic tells investors it will be profitable for second straight quarter

aalephnerd about 2 hours ago 56 commentsRead Article on reuters.com

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Discussion (56 Comments)Read Original on HackerNews

darkwizard42•about 1 hour ago

Seeing a lot of tricks similar to how ridesharing companies tried to be "profitable" before going to IPO. Caveat: Thing have materially improved but really Uber is carried by its insane Ads margins

The idea of removing model training from your costs is a little wild tbh.

The profitability of being able to serve a query wasn't really under question (nor is the margin expected to be anything less than 80%+) I think.

embedding-shape•about 1 hour ago

> The idea of removing model training from your costs is a little wild tbh.

Yeah, I didn't believe they'd claim something like that. But yes indeed, from the article:

> Anthropic's gross margins are above 80% before accounting for revenue shared with distribution partners, including Amazon (AMZN.O), opens new tab, and the cost of training its model,

Is this how all AI companies calculate if they're profitable or not, by removing the highest costs? What a circus.

_diyar•38 minutes ago

> Anthropic has told shareholders that its adjusted operating income will be positive for a second straight quarter, the Financial Times reported on Sunday, citing multiple people with knowledge of the matter.

Note this claim is about „operating profit“, which commonly is the revenue - operating expenses (COGS, rent, payroll). This does not include RnD cost.

>Anthropic's gross margins are above 80% before accounting for revenue shared with distribution partners, including Amazon (AMZN.O), and the cost of training its model, the newspaper said.

Gross margin is typically (revenue - COGS) / revenue. Thus, both statements above seem generally in line with commonly accepted accounting standards.

yread•9 minutes ago

If you are sharing revenue (royalties, licenses based on revenue, costs that scale directly with revenue) doesnt that count as cost of goods sold?

sandeepkd•40 minutes ago

The way I read it, they are convincing the investors that they can fool the larger population convincingly. At the end of the day the investor term is misnomer for big institutional investors, given that these people are managing other people money where they always make out a certain percentage of fees despite the outcome.

SlightlyLeftPad•35 minutes ago

I believe this is a new accounting method called “phantasmagorical accounting.”

aesthesia•about 1 hour ago

> The profitability of being able to serve a query wasn't really under question

In one sense, yes, but I do see people question it regularly.

TSiege•40 minutes ago

I think part of the big push to "slow down AI development" is to add some sort of regulatory pressure that will give them sort cover to train less models and slow their burn rates

awongh•41 minutes ago

I didn't realize how much money Uber makes from ads.... Why does every business devolve into an ad platform?

agentultra•20 minutes ago

Might be because most hit their maximum growth but need to keep growing indefinitely or risk becoming a “mature” company?

JumpCrisscross•about 1 hour ago

> idea of removing model training from your costs is a little wild tbh

It's one of several metrics and tries to estimate steady-state profitability. It's the only one being leaked because it's the most sensational one. But don't assume cash-flow profitability is negative just because you don't know it.

throwawaysleep•about 1 hour ago

> The profitability of being able to serve a query wasn't really under question (nor is the margin expected to be anything less than 80%+) I think.

HN had long debates about whether AI inference could even be affordable from a compute perspective.

sphinxterai•about 1 hour ago

Well then you haven't listened to Ed Zitron or any of the other AI bubble doomers. His contention is that its worthless and they lose money on every query.

embedding-shape•about 1 hour ago

But isn't he taking all the costs into account, that created the experience? Rather than just literally the inference/serving infrastructure? Bananas way of calculating things if so, doesn't match reality at all.

JumpCrisscross•about 1 hour ago

Zitron is worthless–lying about numbers and not correcting the record when you're called out means you aren't trustworthy. Worse than that if you directionally agree with him, which I do.

rowanG077•41 minutes ago

He makes his money and fame by spewing bulshit as many grifters before him.

Which unfortunately probably hides the real truth. That large labs do have potential problems with long term profitability.

freejazz•41 minutes ago

isn't that when the training costs are actually accounted for?

nemomarx•about 1 hour ago

"profitable without COGS" doesn't actually mean anything at all does it?

JumpCrisscross•about 1 hour ago

Profitable without Capex, i.e. gross margin. Inference is included in COGS. Capex (training) is not. That's reasonable.

icedchai•27 minutes ago

Is it really capex though? New models are being constantly trained, released at least quarterly, while old ones become obsolete. Training costs vary, but never disappear.

cmdli•42 minutes ago

This also includes revenue sharing with distribution partners, which should probably be in COGS.

freejazz•39 minutes ago

Isn't training necessary for the end-product? How is it not a cost to generate the output if you can't generate the output without having done the training? Seems more like saying that a car is profitable product when you don't have to account for the steel that its made from. Seems completely disingenuous.

seizethecheese•14 minutes ago

In what case is capex (for any company) not required for the end product? Are you arguing it’s disingenuous to begin with as a concept?

icedchai•24 minutes ago

It's an accounting trick.

mrweasel•about 1 hour ago

Is that basically: We'd be making money, if we didn't have to build the product?

cdrnsf•about 1 hour ago

I imagine there are many other businesses that would be profitable if they excluded all of their largest costs from their reporting.

throwaway_95283•42 minutes ago

Turns out building houses is super profitable once you remove the cost of building materials, labor, and land.

burgerboii•41 minutes ago

I believe that their desire to slow down AI development is just for profits.

Active competition requires constant reinvestment and does not allow them to milk their trained models long enough (except poor Haiku maybe).

ChrisBland•about 1 hour ago

GAPP or ACSOI? Adjusted Consolidated Segment Operating Income from the groupon days....

maherbeg•about 1 hour ago

Is this community adjusted EBITDA?

jimmydoe•about 1 hour ago

very convoluted, number game but probably works for casual investors who just want to put money in something.

winfredJa•40 minutes ago

surprised by 80% margin that doesn't include training cost.

jqpabc123•about 2 hours ago

Yes, but --- using something they call "adjusted operating income".

This is reportedly a sort of "Enron" accounting which excludes some really big expenses like revenue sharing, the cost of model training and hardware deploymments which are kept off the corporate balance sheet using "special finance vehicles".

https://www.msn.com/en-us/technology/artificial-intelligence...

sigmar•about 1 hour ago

>This is reportedly a sort of "Enron" accounting which excludes some really big expenses like revenue sharing, the cost of model training and hardware deploymments

source? this seems false. reportedly the adjusted profitability includes inference and amortized training costs

jqpabc123•about 1 hour ago

source?

Listed at the end of my post.

this seems false.

Source showing this in accordance with GAAP (Generally Acceptable Accounting Practices)?

sigmar•about 1 hour ago

that says only that the gross margin calculation excludes profit sharing and training. You should read it more carefully

edit: def not gaap profitable or they would have said that to investors. and their stock-based comp is surely astronomically high on paper.

mixdup•about 1 hour ago

It's really easy to be profitable when you exclude all of your expenses

throwaway85825•about 1 hour ago

GAAP or non GAAP profitable?

datadrivenangel•about 1 hour ago

non GAAP. If they were GAAP profitable they either wouldn't be sharing or would be IPOing already.

JumpCrisscross•about 1 hour ago

> If they were GAAP profitable they either wouldn't be sharing or would be IPOing already

They'd be in their quiet period...

dr_faustus•35 minutes ago

Pathetic! At my company, we have a 100% margin before accounting for cost!

altmanaltman•about 1 hour ago

> Anthropic's gross margins are above 80% before accounting for revenue shared with distribution partners, including Amazon (AMZN.O), opens new tab, and the cost of training its model, the newspaper said.

Yes the company known for famously training 1 model

layer8•about 1 hour ago

The “opens new tab” sometimes drives me insane when using TTS to listen to Reuters articles. I’m assuming they are using the wrong CSS/markup for the purpose.

sobiolite•about 1 hour ago

Well fortunately now we're gonna be Pacing the Frontier.

unreal6•about 1 hour ago

I cynically wonder how much of this "pacing" is a mutual decision to reduce training expenditure costs as OpenAI and Anthropic plan to IPO.

thewebguyd•about 1 hour ago

Or they've hit diminishing returns that will collapse their valuation, so saying "this is a threat to humanity" sounds better than "This is about as good as the tech is going to be for a long time" to investors.

stackskipton•about 1 hour ago

My guess is a ton. According to https://www.thebignewsletter.com/p/monopoly-round-up-just-st..., they are asking for exception to anti trust as this type of collaboration would normally be massive anti trust violation.

GiorgioG•about 1 hour ago

This is Enron-level fraud. What would Ford/GM/Toyota's gross margins be without the cost of manufacturing vehicles?

maerF0x0•about 1 hour ago

That's a bit hyperbolic. It's closer to using EBITDA as your "earnings" and bucketing model costs in a rapid depreciation model (which is fair, I'd assume a model is good for more than just 1 year...

JumpCrisscross•about 1 hour ago

It's gross margin. Not including training in gross margin is perfectly reasonable.

freejazz•36 minutes ago

Unfortunately, just stating that something is reasonable does not make it true.

lovich•42 minutes ago

The models don’t exist without training. I don’t see how excluding the training cost from the thing they are selling(inference) is perfectly reasonable and not just an accounting trick.

If I am building a widget and have a widget factory that cost money to build and operate, is it reasonable to only use the cost of shipping my widgets to my buyer as the costs for my gross margin?

judge2020•about 1 hour ago

More similar to if they took out the cost to design the cars and all the many levels of corporate overhead they have in the form of middle management.