Better Offline - Monologue: Anthropic Is Not Profitable Unless You Remove Its Costs

Episode Date: May 22, 2026

In this week's Better Offline monologue, Ed Zitron runs you through Anthropic’s claims it will be non-GAAP EBITDA profitable for Q2 2026 by having SpaceX discount its compute costs, and how said revenues don’t match up with its CFO’s sworn affidavit or previous reporting on its finances.Companion newsletter: https://www.wheresyoured.at/anthropics-profitability-swindle/ https://www.flyingpenguin.com/wheres-ed-anthropic-told-court-5-billion-but-public-19-billion/ Please subscribe to my premium newsletter - save $10 off a year of my premium newsletter: https://edzitronswheresyouredatghostio.outpost.pub/public/promo-subscription/gzqwkv54e1 YOU CAN NOW BUY BETTER OFFLINE MERCH! Go to https://cottonbureau.com/people/better-offline and use code FREE99 for free shipping on orders of $99 or more. --- LINKS: https://www.tinyurl.com/betterofflinelinks Newsletter: https://www.wheresyoured.at/ Reddit: https://www.reddit.com/r/BetterOffline/  Discord: chat.wheresyoured.at Ed's Socials: https://twitter.com/edzitron https://www.instagram.com/edzitron https://bsky.app/profile/edzitron.com https://www.threads.net/@edzitron Email Me: [e-mail] omnystudio.com/listener for privacy information.

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in which there were more homages to enslavers than there were to enslave people. Listen to Rebel Spirit Season 2 on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. Also Media. Helen, welcome to a very special Better Offline monologue. I'm your host, Ed Zittron. Better 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 der profitability, so earnings before interest, tax and bad stuff, really, saying that Anthropics revenue was set to more than double to $10.9 billion in the second quarter of 2006, 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 operating 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. And all of these numbers are mysteriously leaking exactly while Anthropic is raising its funding round. 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 is accepted accounting principles basis.

Anyway, I wonder how they did it, because based on the unhelpfully labeled diagram from the journal's article. It appears, as I said last year, that Anthropics cost 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 fast 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. It'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 sign 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 S-1, 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. That's $15 billion a year in compute cost, but reduced to an indeterminately discounted level for the precise months that Anthropic is using to tell its investors in 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 journalist gave it an out-of, costs might increase, and released it on the day of it. invidia's earnings as a means of keeping the AI bubble inflated. Nothing 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 by my reporting from last year on its AWS costs, a business that has its costs linearly increase 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 outpaced its costs? I had 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 us upfront revenue. This would both inflate revenue numbers and depressed 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-gap accounting. Like you could just say whatever.

In a real company or a public company, that would be considered deferred revenue. Anthropics are already offering discounted tokens for Claude users too through the buy extra credits page on their accounts with discounts ranging from 10% to 30%. It, 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 Anthropics 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. On February 12, 202026, Anthropic claimed it had reached $14 billion in annual recurring revenue.

As a reminder, ARR is the 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 of Anthropic, would declare under oath in a court filing that Anthropic had brought in revenues exceeding $5 billion to date. So just to be clear, lifetime revenues. Also keep in mind that the information had previously reported that Anthropic had $4.5 billion in revenue. 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 to 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. And 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.

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or wherever you get your podcasts. 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 AARs, 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 AARs make sense

and would actually be in the region of $4.8 billion. Fine. 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 the ARIRRRs, 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. The only real defence that anybody has here is that Krishna Rao, under oath, lowballed the US government and adjudged 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 Anthropics previously reported ARR from January 2025 to March 3, 26, already gets us to around $6.66 billion. dollars. 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 bottle emerging from AI. And I'm, I'm sorry,

that's not what's happening. Dario Amadaya 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 Anthropics' actual compute constraints were, because Anthropic immediately loosened rate limits for Claude subscribers on announcing the deal, meaning that it is immediately started having higher inference costs, which somehow led to it making a higher profit? Or did Musk, as literally described in its S-1, 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. If 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. You're just humoring you for a second.

If you're so profitable, why aren't you IPOing? 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 discounts specifically covering the period in which you're profitable. I will give Dario Amaday 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 their first. If you take this as an incontrovertible prove that Anthropic is profitable, you are deliberately ignoring the blatantly obvious ways these numbers are being massaged. We've got its 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 do you should be just asbest of, or do you know, discounts from suppliers or obfuscated accounting metrics. You 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 metric 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, we work 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. And 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 flimsyest 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. Costs increased linearly with revenue and will continue to do so in perpetuity. I genuinely can't wait for OpenAI and Anthropic to file that goddamn S-1s. Joy is essential and it's also elusive, but now

there's a new and exciting way to start your journey toward a more joyful existence. Joy 101. It's a new podcast hosted by me, Hoda Kotby. If you're craving inspiration to maximize your joy, tune into these candid, uplifting, and moving on-air chats. Open your free I-Heart Radio app. Search Joy 101 and listen now.

Joy 101 with Hoda Kotby is presented by CVS. Hey, this is Chuck from Stuff You Should Know, and we're submitting our most sciencey episodes for your peer review with our news, stuff you should know doing science playlist. Out now. You want to know about Occam's razor? Simplest explanation is usually the right one? We got you covered. Wondered what chaos theory is ever since the first time you saw Jurassic Park. Well, come on down. So distill a nice pot of tea, everybody, turn down the gas on your Bunsen burner and slip into your most comfortable lab coat

and listen to the stuff you should know doing science playlist on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. Here's something that should not be as complicated as it is, getting a racist statue removed. And here's something that should be a whole lot easier than it is, getting a new one put up in its place. I'm Akela Hughes, and Rebel Spirit Season 2 is about both of those things. As I was watching these statues come down, I was thinking about what it meant that I grew up in a majority black city in which there were more homages to enslavers than there were to enslave people. Listen to Rebel Spirit Season 2 on the IHeart Radio app, Apple Podcasts, or wherever you get your Podcasts.

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