Monologue: Anthropic Is Not Profitable Unless You Remove Its Costs

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2:18Better Offline. On Wednesday, the Wall Street Journal ran a story about how Anthropic is about to have its first profitable quarter, specifically an operating profit or a bit de profitability. So earnings before interest, tax and bad stuff, really, saying that Anthropic's revenue was set to more than double to$10.9 billion in the second quarter of 2026, which is when said profit would happen. Per the journal, Anthropic generated$4.8 billion in sales in the first quarter, and in Q2, that's that$559 million of rating profits home. Interesting. There's a lot of certainty considering we're barely through the first half of the second quarter, and quite a specific number given the fact that June hasn't started.

3:04And all of these numbers are mysteriously leaking exactly while Anthropic is raising its funding round. Oh, and there's another important note from the story too. The journal adds at the very bottom of the article that it, and I quote, is unclear what accounting methods Anthropic has used to book revenue and costs, as the company isn't yet required to follow the financial reporting requirements of a public company. That's right, Anthropic is possibly going to be a bit deprofitable for a single quarter on a non-gap, so generally accepted accounting principles basis. Anyway, I wonder how they did it.

3:37Because based on the unhelpfully labeled diagram from the journal's article, it appears, as I said last year, that Anthropic's costs scale linearly with its revenues, except they magically didn't in the second quarter. How? And I wonder if Anthropic will somehow stay profitable. Let's see if the journal has a quota. Oh, there we go. Okay. The company might not remain profitable for the full year as it plans spending increases due to its vast computing needs. Hmm. Interesting. That's very interesting. So Anthropic may be profitable very specifically in the second quarter of 2026, but might not be afterwards.

4:16It's almost as if it found a way to specifically cut its costs in May and June somehow, because it did. Remember that deal Anthropic signed with SpaceX to take over Colossus 1? Well, it's also extending to Colossus 2, and they're going to be paying SpaceX$1.25 billion a month starting in May and June. And in those two months, they're going to have reduced fees. You know, the quarter in which Anthropic is magically profitable. The one with the lower costs. Per SpaceX's S1, pursuant to its agreement, Anthropic will pay SpaceX$1.25 billion a month through May 2029 with capacity ramping up in May and June at a reduced fee.

5:00That's$15 billion a year in compute costs, but reduced to an indeterminately discounted level for the precise months that Anthropic is using to tell its investors and the media that it has an operating profit. $559 million in operating profit in a three-month period is absolutely possible when you're not paying for all your costs. While I wouldn't say this is cooking the books, I would say it's definitely a shiatsu-grade massaging of the numbers. Anthropic has deliberately leaked a quarterly profit, and I'm doing air quotes, where it knows it can suppress its costs, specifically made sure that the journalists gave it an out of costs might increase, and released it on the day of NVIDIA's earnings as a means of keeping the AI bubble inflated.

5:41Nothing has changed. If Anthropic was paying the full rate for its compute in those two months, its economics would shift right back to where it's always been per my reporting from last year on its AWS costs, a business that has its costs linearly increased with its revenues. I also severely doubt that Anthropic managed to make the cost of running their services profitable in the space of six months. Per the information in January, Anthropic missed on its gross margin projections for 2025, saying that its inference costs were 23 % higher than the company had anticipated. How did Anthropic, who faced a massive influx of new business to the point that it was forced to buy more compute from Elon fucking Musk, suddenly have its revenue outpace its costs.

6:23I got a few guesses other than the obvious way in which they reduced their costs. Number one, for large enterprises, they're taking prepayment of tokens, so$50 million intended to be spread over 12 months, that it's taking as upfront revenue. This would both inflate revenue numbers and depress costs, because Anthropic wouldn't have actually provided the compute necessary to earn that revenue yet. Perfectly legal, because this isn't non-gap. This is non-GAAP accounting. You could say whatever. In a real company, in a public company, that would be considered deferred revenue. Anthropic is already offering discounted tokens for Claude users, too, through the Buy Extra Credits page on their accounts, with discounts ranging from 10 % to 30%.

7:02It, again, may be booking this up front rather than saying, okay, let's book this as the person uses the compute. They could also be front-loading annual commitments of basically any kind, subscriptions to Claude, enterprise or team agreements, and so on. and they could have deliberately ratcheted down training to ease the burden on its infrastructure to provide inference. But, if I'm honest, the revenue side is where the real problems lie. So Anthropic has said it brought in$4.8 billion in revenue in the first quarter of 2026, and projects to hit$10.9 billion in Q2 2026. This is pretty tough to reconcile with previous reporting.

7:42On February 12th, 2026, Anthropic claimed it had reached$14 billion in annual recurring revenue. As a reminder, ARR is an accounting tool largely used by startups, but some public companies too, where a snapshot of a single month's income is taken and multiplied by 12. This gives you an implied monthly revenue of like$1.16,$1.17 billion. On March 3rd, 2026, Wario Amadei would claim Anthropic had reached$19 billion in ARR, so about$1.58 billion per month. Three days later, on March 6th, Krishna Rao, Chief Financial Officer at Anthropic, would declare under oath in a court filing that Anthropic had brought in revenues exceeding$5 billion to date.

8:24So just to be clear, lifetime revenues. Also keep in mind that the information had previously reported that Anthropic had$4.5 billion in revenue in 2025, which already puts us at the limits of credulity. While boosters may claim that exceeding could mean literally any number they want above$5 billion, I found it doubtful that the CFO of Anthropic would, under oath, lead the court to believe its business was 30-40 % smaller than it was, especially when trying to convince it that the damage of being labeled a supply chain risk would ruin its business. They would want it to seem bigger than it is, not smaller.

9:00And at this point, it's impossible to reconcile that 2025 reporting with that$5 billion number. No one wants to talk to me about it. None of the journalists involved, no analysts. No one wants to talk about this at all. It makes them uncomfortable and angry, I assume, probably because it's impossible to reconcile.

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13:08Just listen. We don't care where you hear it. If we assume that the ARR claims made by Anthropica correct, we can presume that it made revenues of roughly$2.4,$2.5 billion in March, given that it claimed it had$30 billion of ARR on April 6th. If you're getting confused with the numbers, by the way, there's a newsletter attached to this. Nevertheless, when you add up all those ARRs, you get to about$5.25 billion, which is in excess of what the Wall Street Journal had said, and in some world, maybe there's a way of cherry-picking using particular periods to the point that the ARRs make sense and would actually be in the region of$4.8 billion.

13:47Fine. But they don't make a lick of sense when you bring up what Krishna Rao, their CFO, said. If we believe Anthropics leaks, putting aside all their ARR figures for a second, this means that Anthropic A, made over 90 % of its lifetime revenues in the first quarter of 2026, and B, made virtually no revenue its previous years, and C, leaked completely imaginary run rates to the media for years. While I acknowledge that Anthropic appears to have grown significantly, that level of stratospheric growth does stretch the limits of their credibility. Moreover, the fact that previous ARR figures are inconsistent with the leaked charts from Anthropic further raises questions about the credibility of, well, any numbers from the company.

14:29The only real defense that anybody has here is that Krishna Rao, under oath, lowballed the US government and a judge to such a dramatic extent that he hid in excess of$4 billion in revenue. And as I've discussed before, and Flying Penguin helpfully collated, which I'll link in the notes, adding up Anthropic's previously reported ARR from January 2025 to March 3rd 2026 already gets us to around$6.66 billion. Now, I know there are going to be some boosters who hear about this and they're going to be like, well, this is proof there's a business model emerging from AI, and I'm sorry, that's not what's happening.

15:06Dario Amadei and Elon Musk worked out a sweetheart deal, framed as a ramp-up that allowed Anthropic to artificially depress its costs. I also question how much of a ramp-up there really was, or what Anthropic's actual compute constraints were, because Anthropic immediately loosened rate limits for Claude subscribers on announcing the deal, meaning that it immediately started having higher inference costs, which somehow led to it making a higher profit. Or did Musk, as literally described in its S1, have SpaceX charge Anthropic less for two specific months to make the numbers look better? In July, Anthropic will start paying SpaceX$1.25 billion a month, or about$15 billion a year, on top of all its other compute deals with Google, Amazon, and Microsoft.

15:52If we assume that its spend is comparable on AWS and Google Cloud, and it's most assuredly more, that means Anthropic is spending around$3.75 billion a month in compute costs, or$11.25 billion a quarter, or$45 billion a year. I'm 100 % sure it's more than that. There's also a very compelling argument that Anthropics costs will increase and will eat up that profitability. To once again repeat the quote from the journal, the company might not remain profitable for the full year as it plans spending increases due to its vast computing needs. I also have to wonder, this company's profitable. Just humoring you for a second.

16:29If you're so profitable, why aren't you IPO-ing? Why not take this to the public markets? unless of course you're only non-gap a bit to profitable based on a two-month-long discount specifically covering the period in which you're profitable i will give dario amade credit nobody does it better nobody does financial engineering and press-led information war better than anthropic the utter willingness of the press to eat up incongruent numbers and the eagerness of many to jump up and find obtuse ways to explain away the obvious problems is only made possible when a company has perfected the art of manipulation and ingratiation of those who want to feel like they're first.

17:08If you take this as an incontrovertible proof that Anthropic is profitable, you are deliberately ignoring the blatantly obvious ways these numbers are being massaged. We've got it CFO saying numbers that don't match up with any of their leaks or their own marketing materials and the aggressive and deluded way in which people ignore them is equal parts frustrating and depressing. So I want to speak to any AI boosters in the audience and I want to speak with a little more empathy than usual. If you want Anthropic to win, you should be just as skeptical of these numbers as I am. You should want to smash my face in the tarmac with the most crystal clear, impossible to argue with numbers, bereft of asterisks or discounts from suppliers or obfuscated accounting metrics.

17:49You should want better from your heroes. If you truly think this company is amazing, unstoppable, and leading the tech industry to a glorious era of innovation, there shouldn't be this many questions, and the metrics shouldn't be this murky. Every other time when a company has played this level of silly weird bullshit, it's led to disaster. For example, WeWork claimed to be profitable since the second month of its operations, and repeated those claims of profitability throughout its existence, until it turned out it was only profitable if you removed things like some of the costs of doing business.

18:21And I get why you're so defensive, and I get why you want this to work. A lot of you are very excited about generative AI, and being excited about it has given you a tremendous community of equally excited people. I get that you like these tools, and I need you to know that these companies are laughing at you. Anthropic timed this leak to focus on a specific quarter where it artificially suppressed costs and gave you the flimsiest proof imaginable, specifically crafted for you to share it as a triumph and spread the idea that AI labs are actually profitable when their core economics haven't changed.

18:52Costs increase linearly with revenue and will continue to do so in perpetuity. I genuinely can't wait for OpenAI and Anthropic to file that goddamn S1s.

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19:57People are talking too much. We debate about food, deep dish, tavern style, who's got the best beef. We yell across rooms, across blocks, across generations. Yes, nice earrings, Grammy. And now we're doing it on our phones, too. Video calls from the L train, group chats that never shut up. Neighbors texting you the score before your TV catches up. Get a load of this guy. Ketchup. On a dog. Yeah, we've got thoughts. Because nothing here gets built without conversation. Nothing moves without connection. So if you think you know AT &T, it might be time to rethink that because their network has improved, like, a lot, which means Chicagoans can keep speaking their mind with the top-rated fiber internet in the city.

20:38Chicago won't stop talking. Our improved network backs it up. AT &T, connecting changes everything. AT &T Fiber limited availability in select areas. Top-rated and fastest internet. AT &T Fiber, based on analysis by Eucalypt's BTES Intelligence data to age 2025. Hey, guys, it's us and the Jonas Brothers. I'm Joe. I'm Kevin. And I'm Nick. And guess what? We created our own podcast called Hey Jonas. We invented a podcast? Well, we didn't invent it. We just contributed to it. We're the first people to do podcasts. We get to ask other people questions because we're sick and tired of being asked questions.

21:10Well, sick and tired is a strong way to put it, but you know. Tired and sick. Tired and sick. Listen to Hey Jonas on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Just listen. We don't care where you hear it.

21:26Bud and I sat down with Steph and Curry. Steph talks pressure, confidence, and what it really takes to stay great. There's different categories, I guess. So I'm like conditioning, shooting drills, where you try to simulate kind of games. Look at her face. We have a love-hate relationship with those because you know you're getting something out of it. You don't look forward to those days. Listen to Bud Around and Find Out on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. This is an iHeart Podcast. Guaranteed Human.