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<p>The idea of removing model training from your costs is a little wild tbh.<p>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.
> The idea of removing model training from your costs is a little wild tbh.<p>Yeah, I didn't believe they'd claim something like that. But yes indeed, from the article:<p>> 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,<p>Is this how all AI companies calculate if they're profitable or not, by removing the highest costs? What a circus.
> 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.<p>Note this claim is about „operating profit“, which commonly is the revenue - operating expenses (COGS, rent, payroll). This does not include RnD cost.<p>>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.<p>Gross margin is typically (revenue - COGS) / revenue. Thus, both statements above seem generally in line with commonly accepted accounting standards.
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.
I believe this is a new accounting method called “phantasmagorical accounting.”
> The profitability of being able to serve a query wasn't really under question<p>In one sense, yes, but I do see people question it regularly.
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
I didn't realize how much money Uber makes from ads.... Why does every business devolve into an ad platform?
> <i>idea of removing model training from your costs is a little wild tbh</i><p>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.
> 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.<p>HN had long debates about whether AI inference could even be affordable from a compute perspective.
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.
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.
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.
isn't that when the training costs are actually accounted for?
"profitable without COGS" doesn't actually mean anything at all does it?
Profitable without Capex, <i>i.e.</i> gross margin. Inference is included in COGS. Capex (training) is not. That's reasonable.
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.
This also includes revenue sharing with distribution partners, which should probably be in COGS.
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.
Is that basically: We'd be making money, if we didn't have to build the product?
I imagine there are many other businesses that would be profitable if they excluded all of their largest costs from their reporting.
I believe that their desire to slow down AI development is just for profits.<p>Active competition requires constant reinvestment and does not allow them to milk their trained models long enough (except poor Haiku maybe).
GAPP or ACSOI? Adjusted Consolidated Segment Operating Income from the groupon days....
Is this community adjusted EBITDA?
very convoluted, number game but probably works for casual investors who just want to put money in something.
surprised by 80% margin that doesn't include training cost.
Yes, but --- using something they call "adjusted operating income".<p>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".<p><a href="https://www.msn.com/en-us/technology/artificial-intelligence/the-very-big-caveat-to-the-report-that-anthropic-is-profitable-for-a-second-straight-quarter/ar-AA2cbhG0" rel="nofollow">https://www.msn.com/en-us/technology/artificial-intelligence...</a>
>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<p>source? this seems false. reportedly the adjusted profitability includes inference and amortized training costs
It's really easy to be profitable when you exclude all of your expenses
GAAP or non GAAP profitable?
Pathetic! At my company, we have a 100% margin before accounting for cost!
> 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.<p>Yes the company known for famously training 1 model
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.
Well fortunately now we're gonna be Pacing the Frontier.
This is Enron-level fraud. What would Ford/GM/Toyota's gross margins be without the cost of manufacturing vehicles?
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...
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.
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