Comment by jandrewrogers
14 hours ago
If you are growing revenue at a high rate then taking profit is a misallocation of resources. That is short-term thinking. It is much better to reinvest in revenue growth.
You can take small profit now or much larger profit later. Insisting that companies need to be profitable even when growing revenue rapidly is failing the marshmallow test.
The point is that the unit economics are way worse because inference is expensive. Cost of goods sold matters, even if you're reinvesting profits.
But we don't have visibility on the COGS until they IPO and file, right? So where is all this premature judgement coming from about their unit economics?
(not pointing the finger only at you, at least you identified that gross margins is the correct thing to look at rather than net profit!)
> But we don't have visibility on the COGS until they IPO and file, right? So where is all this premature judgement coming from about their unit economics?
It's the lack of visibility that causes the judgement; Were the numbers good, it's quite unlikely that Anthropic would be so reluctant to share them.
Were it just Anthropic doing this, it's not much evidence. But it's EVERYONE that obfuscates their numbers, even the publicly traded companies.
Why would Amazon and Microsoft obfuscate the revenues and costs of their AI products? Even their cloud numbers are less clear than desired. And beyond those two, why would the datacenter companies obfuscate their numbers, when everyone desperately needs them to raise debt and investment to build more DCs?
Pretty much the only company showing clear numbers is Nvidia & GPU orders. But immediately beyond that, it's all obfuscated. How many GPUs are sitting in datacenters? They ain't telling.
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I think a lot of us are calling it out because it's a contrast to SaaS/ads businesses where incremental goods sold are practically free compared to R&D, so spending can be looked at as one-time investments. There's very little additional COGS per additional customer in those businesses, so the default assumption to treat AI like other tech businesses has a blind spot.
Anthropic is not MoviePass. Its unit economics will be fine after it decides to optimize for profitability.
All of the analysis seems to rely on:
1. Continuing to grow their share of the market.
2. Margins staying high.
3. Inference costs coming down.
4. A need for Anthropic's models specifically.
I buy 3. But 1, 2, and 4 rely on models continuing to improve at the same rate, such that you need the latest version to stay competitive. At the cut below frontier models, there's already robust competition between open source models, cheaper providers like Deepseek, more local AI alternatives, etc.
I think the case for the unit economics being fine starts to fall apart if you can't charge a large premium for your best in class model.
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Inference has dropped by like 75% from a year ago. While anthropic does offer more tokens now for the same money, the value of the business is based on an expectation of future profits. There are dozens, if not hundreds of examples of companies being valued this way.
You could be right but the unit economics matter to this business in a way they don't for a SaaS or ads business, they're not free and you can't just point at revenue.
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I guess net isn't the relevant measure, but what are the unit economics? Are they actually making money selling tokens?
on the API, their margins are very high
That's not how classical valuations worked though. I was taught the rough shorthand for valuing a company was profits / real_interest_rate, treating the company like a perpetuity. Revenue ain't in it. Now we have a bunch of "We'll make it up on volume companies!" like https://www.youtube.com/watch?v=CXDxNCzUspM
no, it is discounted expected future cash flows
> That is short-term thinking.
Then why IPO? Isn't that even shorter term thinking?
Maybe they are struggling to put together money for datacenter buildout (Capex).