OpenAI doubles compute margin to 70% as it battles high costs and intensifying AI competition

OpenAI sees better margins on business sales, report says | Fortune

The publication reported that the company improved its "compute margin," an internal figure measuring the share of revenue after the costs of running models for paying users of its corporate and consumer products. As of October, OpenAI's compute margins reached 70%, up from 52% at the end of 2024 and double the rate in January 2024, the publication said, citing a person familiar with the figures. An OpenAI spokesperson said the company didn't release the figures and declined to comment further. Read More: OpenAI Executives Struggle to Combat AI Spending Concerns The ChatGPT creator set off the modern AI boom, but it has yet to show a profit, one of the main indicators for investors concerned about a bubble in the industry. Last valued at $500 billion in October, OpenAI has been searching for ways to make money to cover its high computing costs and audacious infrastructure plans. At the same time, the company is facing intense pressure over its spending and renewed competition. After the Gemini model from Alphabet Inc.'s Google performed better on benchmarks, OpenAI Chief Executive Officer Sam Altman called a "code red" to redirect internal resources to improve ChatGPT, and delayed progress on plans for an advertising service. Most people use ChatGPT's free version. However, the company is pushing its business version and paid software features for industries like financial services and education, where it competes with Google and rival Anthropic. The Information reported that OpenAI has better compute margins than Anthropic for paid accounts, but that Anthropic has better efficiency on server spending overall.

OpenAI Doubles Compute Margins To Nearly 70% Amid AI Race: Report - Alphabet (NASDAQ:GOOG), Alphabet (NASDAQ:GOOGL)

OpenAI has reportedly seen a significant improvement in its profit margins, marking a crucial development in the AI industry. OpenAI Boosts Compute Margins to 68% OpenAI has improved its "compute margin," which reflects the portion of revenue remaining after covering the costs of operating models for paying users of its corporate and consumer products. By October, the company's compute margins rose to 68%, up from 52% at the end of 2024 and more than double the level seen in January 2024, reported The Information on Sunday. The report also noted that OpenAI's compute margins for paid accounts are better than those of Anthropic, a competitor in the AI space. However, Anthropic is more efficient in overall server spending. OpenAI, the creator of ChatGPT, has not yet turned a profit, raising investor concerns amid potential industry overvaluation. Last valued at $500 billion in October, the company is working to boost revenue to support its high computing expenses and expansive infrastructure plans. See Also: Trump's Marijuana Reclassification Looks Set To Send This Cannabis ETF Soaring: Big Surge In Momentum Sam Altman Eyes $100 Billion Funding Amid Costs OpenAI's improved profit margins come at a critical time for the company. Earlier this month, Sam Altman, the CEO of OpenAI, expressed concerns about Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) dominance in the AI space and entered the "Code Red" zone. The company's ability to enhance its margins could be seen as a strategic move to strengthen its position in the industry. Moreover, OpenAI is reportedly in discussions with investors about raising as much as $100 billion at a valuation of roughly $750 billion. This potential fundraise, coupled with the improved profit margins, could significantly impact OpenAI's financial standing and its ability to compete with tech giants like Google. However, the increasing costs of competing in AI have also put pressure on OpenAI's finances. SoftBank (OTC:SFTFB) (OTC:SFTBY) is reportedly racing to assemble $22.5 billion in funding for OpenAI by year-end, leaning on asset sales, potential borrowing, and a sweeping pullback in other investments. READ NEXT: Sam Altman Says He's '0%' Interested in Being a Public Company CEO Image via Shutterstock Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. GOOGAlphabet Inc$310.700.68%OverviewGOOGLAlphabet Inc$309.040.61%SFTBYSoftBank Group Corp$55.31-%Market News and Data brought to you by Benzinga APIs

OpenAI 'Compute Margin' Doubles Over Nearly Two Years | PYMNTS.com

By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions. A report Sunday (Dec. 21) from The Information -- also cited by Bloomberg News -- says the artificial intelligence (AI) startup has improved on its "compute margin," an in-house metric for the share of revenue after it factors in the cost of running AI models for its paying corporate and consumer users. As of October, that margin came to 70%, the report said, citing a source familiar with the matter. That's up from 52% at the end of 2024, and double the rate in January of last year. The Information added that while OpenAI has better compute margins than rival Anthropic for paid customers, Anthropic shows better over efficiency on server spending. While OpenAI and its ChatGPT kicked off the current AI boom, the company, last valued at $500 billion, has yet to turn a profit amid worries about a bubble in the sector. Earlier this month, CEO Sam Altman reportedly declared a "code red," calling on employees to bolster ChatGPT amid increased competition from Google and Anthropic. Last week saw a series of reports about the company's fundraising plans, which could value it at anywhere from $750 billion to $830 billion. Meanwhile, consumers have spent more than $3 billion on the ChatGPT mobile app in the roughly 31 months since it was launched, according to findings last week from mobile analytics and intelligence platform Appfigures. The bulk of that figure -- $2.5 billion -- was spent just this year, with spending up 408% since last year, the report found. Appfigures also noted that the speed with which the ChatGPT mobile app arrived at the $3 billion milestone in mobile consumer spending was faster than TikTok and major streaming apps. As PYMNTS CEO Karen Webster wrote last week, close to 900 million people submit queries to ChatGPT each week, driving 2.5 billion queries a day. That's happened over three years, while Google took 13 years to achieve such volume. PYMNTS Intelligence data shows that more than half the U.S. population uses ChatGPT and other chatbots for the various pillars of the connected economy, the activities guiding the way people "shop, pay, live, work, eat, stay well, have fun, travel, communicate, and bank." There are 30 million power users who turn to their chatbot for 25 or more of the 54 activities that represent these connected economy pillars. More than 80% of those users deploy AI for shopping discovery, daily planning, learning and even health and wellness. "In just three short years, more likely in just the last 12 months, they've rewired their entire digital footprint around these conversational interfaces," Webster wrote.