OpenAI is losing money out the wazoo.
The ChatGPT maker told investors Tuesday that its operating losses in the third quarter topped $10.9 billion, up from $10.1 billion in the previous one. That’s striking because the company actually grew its revenue by around 50 percent from the second to the third quarter, per the The Wall Street Journal, though it wasn’t enough to offset its astonishing expenses — illustrating just how steep of a gap it still has to close to achieve profitability.
The increased revenue also came by betraying a core promise, which is hardly a surprise for a company that has long abandoned its eponymous tenet of promoting open-source AI development.
In February, OpenAI started showing ads on its chatbot, an idea that CEO Sam Altman had previously called “unsettling” and vowed would only be used a “last resort.” The company’s chief competitor Anthropic ruthlessly mocked it for the reversal in a series of Superbowl commercials, and many users were furious. The company hasn’t officially reported how much stuffing ads into its premier product is earning it, but in August it said that its ad division was on track to rake in $1 billion in a year.
The news comes not long after controversy over how OpenAI was projecting its earnings. In October, the company reported an annualized revenue, an estimate of how much money it will earn over a year, of about $50 billion — which was $20 billion short of what it told investors only a month before.
The discrepancy was taken as an admission that the business models of AI companies weren’t as robust as their leadership was making them out to be, fueling speculation of an impending bubble.
It also comes as OpenAI and Anthropic submit themselves to more scrutiny as they each prepare for what are expected to be historic IPOs. The looming event has only heightened their rivalry, with OpenAI making strides to catch up to the Claude-maker in enterprise sales. Anthropic has cornered the corporate customer market with its coding tools, while OpenAI has lagged with a more broadly consumer-focused model, though its president boasted last week that it now generates most of its revenue from enterprise sales.
Big picture, in just a few years the AI sector has gone from an asterisk in the tech industry to its shining star — but unless frontier labs like OpenAI can figure out how to make money instead of burning it, investors are going to start asking some hard questions.
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