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"Anthropic and OpenAI generate a lot of revenue with relatively few employees – an estimated $9M and $5.5M in revenue per employee (RPE), respectively. If eithe
by erwald 2mo ago
"Anthropic and OpenAI generate a lot of revenue with relatively few employees – an estimated $9M and $5.5M in revenue per employee (RPE), respectively. If either company were to go public, it would have a higher RPE than any public tech company on Forbes’ Global 2000 list." https://epoch.ai/data-insights/revenue-per-employee-ai-companies https://epoch.ai/data-insights/revenue-per-employee-ai-compa...
- TheOtherHobbes 2mo agoThey've replaced employees with compute, so RPE is irrelevant.
- erwald 2mo agoThe point is that revenue is large and growing quickly, which is what the comment above mine denied
- toomuchtodo 2mo agoThis assumes they do not have to increase prices to be profitable, and that they will continue to have customers when customers can switch to open models at similar performance. As an analogy, Uber could crank up rates after the VC growth play was over to stoke revenue and profits because they have a duopoly with Lyft. LLM consumers can switch to Kimi models fairly trivially today, and whatever the frontier open model landscape looks like later. Model training and development is expensive, self hosted inference on open models not so much. https://www.wheresyoured.at/the-openai-bubble/ https://www.wheresyoured.at/the-openai-bubble/ has the math. (a component of my work is currently building scaffolding so our organization can swap out commercial inference providers for on prem inference infra to derisk against the eventual rug pull when the math gets icky for LLM providers, while consuming as much subsidized tokens as we can until then, when it makes sense to use tokens for work)
- lenerdenator 2mo agoThe question will be whether customers can switch. Can you install a near-SOTA model on a cluster in a data center? Of course. Compliance and operations are the sticking points. I work in healthcare IT, and it's amazing how tight the data compliance requirements are. I can't have someone in Canada look at prod data. If we told hospitals that we were handing off PHI/PII to Chinese models, they'd end our relationship due to the long history China has of hacking Western networks and computers. They don't care how open and cheap things are. Then, you have to keep up-to-date on the latest technology and right-size things in a very fluid market. If you sign a contract for hosting the model on a data center that's running what the SOTA is now in hardware, and someone comes through with a data center hardware or software product that makes that data center contract a disadvantage (maybe it's too expensive and the other party won't budge on the price), you might have to factor that into your offering's price, and that could put you at a disadvantage in your marketplace. Google, MS, etc. all want to leverage the cloud model to make this be less of an issue for you, for a price. They have the ability to update you with the SOTA stuff in the data centers, because they're the ones driving that SOTA. They can say they host in the US and develop most of their stuff in the US. Will that be enough of a moat? Probably not for the levels of spending that are happening now, but over the long term, probably.
- toomuchtodo 2mo agoMy primary role is cybersecurity in a regulated entity in a regulated industry, I am highly confident it is straightforward to do so based on work accomplished in only a couple of weeks. Stand up a router, stand up a Kubernetes cluster if you don't have one, stand up the necessary VMs and compute for serving inference. Two pizza team, in my experience. Customers can switch (although we can argue the speed and pain of doing so), and the speed at which they do will be a function of cost efficiency and demonstrable value (imho). A recent example of this is Broadcom and VMware [1], for example. When motivated, it can be done. If there is no objective, measured value being delivered, the spend will be cut. If the value delivered is measured, it will be enabled at a lower cost through cost optimization measures (ie self hosting) [2]. This is all to say: there is no moat, the revenue of inference providers is volatile and not assured in any measure. Caveat emptor. [1] https://hn.algolia.com/?dateRange=all&page=0&prefix=false&query=vmware%20broadcom&sort=byDate&type=story https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu... [2] Microsoft considers replacing ChatGPT and Claude with Kimi K3 to save $600M - https://news.ycombinator.com/item?id=49022984 https://news.ycombinator.com/item?id=49022984 - July 2026
- erwald 2mo agoThose seem like reasonable questions about future margins and moats, but I was making the narrower point that revenue is in fact growing quickly, contra the comment above mine
- throwaway27448 2mo agoAh well we just need to convert our entire economy into an MLM and then I'm sure we'll be set
- erwald 2mo agoLots of people paying for a product they use is more or less the opposite of an MLM
- wolttam 2mo agoEach one of those employees maps to several fold times more spending on compute.
- erwald 2mo agoTrue, but the comment I was replying to was about revenue, not costs
- icedrift 2mo agoRevenue isn't profit though. Anthropic is already profitable OpenAI financials have looked doomed for the past year
- lightbendover 2mo ago[dead]
- Insanity 2mo agoI’ve never seen anything point to Anthropic being profitable.
- erwald 2mo agoRight, and the comment I replied to was about revenue, not profit. (That said, while I don't think Anthropic is already profitable, it reportedly expects its first operating profit later this year.)
- InsideOutSanta 2mo agoThe revenue needs to be way, way higher than this to warrant the investment.
- erwald 2mo agoMaybe, but that's a different claim. You wrote that the improvements are "not translating to a dramatic increase in revenue", but going from about $1B to about $30B run rate in 16 months seems like a pretty dramatic increase to me!
- serial_dev 2mo agoHow is RPE relevant if they are spending hundreds of billions on compute and data centers?
- erwald 2mo agoIt's relevant to the claim I was replying to, which was that revenue isn't growing, not to the question of whether the spending will pay off
- Ekaros 2mo agoSo they can add employees endlessly? And still make same revenue? Increasing employees only scale so far at those numbers.
- erwald 2mo agoNo, I wasn't claiming that revenue scales with headcount, though it probably does to some extent. The point is that these companies' revenue is large and growing quickly, which is what the comment above mine denied.
- yunwal 2mo agoThe guy who sells $20 bills for $10 also generates a lot of revenue
- dirkc 2mo agoIsn't that just saying CapEx is a bigger part of their costs as if that is a positive thing?
- erwald 2mo agoI wasn't saying anything about costs, only that revenue is growing quickly