They are selling api tokens at good margins. Of course they then reinvest all of it in research for new models and for continued growth. But the api inference is profitable.
replyAnthropic is selling API tokens at 80% margin.
replyAnd API is 80% of their business (subscriptions the other 20%)
But they're still not making money (apart from two quarters when they got massive discounts from xAI).
replyThat’s by choice. Spend more than you make and you can claim no profit. They could become profitable overnight by cutting spending, though that would also be akin to switching from a run to a walk in the AI race.
replyAnd yet, they are highly unprofitable. Yes, people pay for the API because it's a frontier model, but it's a frontier model because of billions of capex that are (so far) not getting recouped. And if they stopped the capex on new frontier models, that API revenue would walk off to whoever else does. If, at some point, the entire industry decides to stop burning money and start squeezing customers, that will be the test of which business models actually survive, and in that scenario I am bullish on scrappier shops that can't possible compete on all fronts now.
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