Monologue: Anthropic Is Not Profitable Unless You Remove Its Costs

Summary

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

Host: Ed Zitron
Date: May 22, 2026
Podcast: Better Offline by Cool Zone Media & iHeartPodcasts

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Episode Overview

In this incisive monologue, Ed Zitron unpacks recent headlines claiming Anthropic—a leading artificial intelligence company—has achieved its first profitable quarter. Through a blend of sharp industry analysis and investigative rigor, Zitron scrutinizes the validity of Anthropic’s purported profitability, highlighting suspicious accounting methods, aggressive “number-massaging,” and the broader implications for the AI industry’s financial health and public narrative.

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Key Discussion Points & Insights

1. Anthropic’s Profitable Quarter: Breaking Down the Headlines

• Wall Street Journal Report: Anthropic allegedly set for a profitable Q2 2026, reporting operating profit (EBITDA) attributable to rapidly rising revenues.
• Revenue Claims: Q1 sales hit $4.8B; Q2 projection jumps to $10.9B.
• Accounting Ambiguity: WSJ itself notes uncertainty over Anthropic’s accounting methods, given the company isn’t bound by public company reporting rules.

“Anthropic is possibly going to be EBITDA profitable for a single quarter on a non-GAAP...basis.”
— Ed Zitron [02:52]

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2. The SpaceX Compute Deal: Cost Suppression Through Timed Discounts

• Colossus Compute Partnership: Anthropic’s deal with SpaceX for “Colossus 1 and 2” compute ramps up in May and June—precisely when costs are reduced.
• Financial Engineering: During Q2, Anthropic pays a discounted rate to SpaceX, artificially lowering its compute costs and enabling the key profit claim.

“$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.”
— Ed Zitron [04:32]

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3. Questionable Revenue Recognition Practices

• Upfront Payments & Deferred Revenue: Large enterprise customers may be making sizable prepayments (e.g., $50M), with Anthropic booking the income upfront, despite services to be delivered over time.
• Discounted Tokens & Subscriptions: Promotion of discounted AI service credits creates the potential for inflated short-term revenue that doesn't match true service delivery.
• Non-GAAP Flexibility: Without public company oversight, nonstandard accounting allows for revenue smoothing and cost shifting.

“You could say whatever in a real company or a public company that would be considered deferred revenue.”
— Ed Zitron [06:21]

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4. Discrepancies & Inconsistencies in Anthropic’s Financial Story

• Disjointed Metrics:
  • February 2026: Company claims $14B annual recurring revenue (ARR), suggesting ~$1.17B/month.
  • March 2026: CEO claims $19B ARR (~$1.58B/month).
  • March 6, 2026: CFO, under oath, states total revenues “exceeding $5B to date”—contradictory with previous metrics.
  • Prior reporting: $4.5B revenue in 2025, casting doubt on Q1/Q2 2026 figures.
• Impossibility of Reconciliation: Zitron expresses frustration that neither reporters nor analysts are willing to address these number conflicts.

“It’s impossible to reconcile that 2025 reporting with that $5B number. No one wants to talk to me about it... Probably because it's impossible to reconcile.”
— Ed Zitron [09:40]

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5. The Real Cost Structure of Anthropic’s Business

• Compute Cost Realities: Starting July 2026, Colossus deal ramps up to $1.25B/month ($15B/year); when factoring similar or higher costs with AWS, Google, and Microsoft, actual compute OPEX may be $45B/year or more.
• Linearity of Costs to Revenue: Historically, Anthropic’s cloud expenses scale directly with revenue—meaning underlying profitability is illusory.

“Costs increase linearly with revenue and will continue to do so in perpetuity.”
— Ed Zitron [17:47]

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6. Market Messaging, Spin, and Media Complicity

• Timing for Maximum Impact: Anthropic leaks profitability claim on the day of Nvidia earnings to buoy the larger AI bubble.
• Media and Analyst Passivity: “Utter willingness” of the industry press to accept inconsistent or massaged numbers is both frustrating and a reflection of Silicon Valley culture.
• Parallel to WeWork: Zitron draws a direct line to past tech hype cycles that hid losses through selective exclusion of real costs.

“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.”
— Ed Zitron [15:00]

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7. A Message to AI Boosters & The Need for Skepticism

• Call for Transparacy: Zitron urges enthusiastic AI supporters to demand genuine, clear metrics, without asterisks or vendor discounts.
• Warning from Tech History: Cautious optimism is necessary, as previous companies promoting “profitability” via dubious methods (e.g., WeWork) ultimately collapsed.

“If you truly think this company is amazing... there shouldn’t be this many questions and the metrics shouldn't be this murky.”
— Ed Zitron [16:28]

“I genuinely can’t wait for OpenAI and Anthropic to file their goddamn S1s.”
— Ed Zitron [17:54]

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Notable Quotes

• “It’s almost as if it found a way to specifically cut its costs in May and June somehow. Because it did.”
  [03:49]

• “I also severely doubt that Anthropic managed to make the cost of running their services profitable in the space of six months.”
  [05:16]

• “I will give Dario Amadei credit. Nobody does it better. Nobody does financial engineering and press led information war better than Anthropic.”
  [15:34]

• “Every other time when a company has played this level of silly, weird bullshit, it's led to disaster. For example, WeWork...”
  [16:53]

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Timestamps for Key Segments

• 02:11–03:49 — WSJ Article Analysis & Early Questions
• 03:49–05:16 — SpaceX Compute Deal and Cost Suppression
• 05:16–07:00 — Revenue Manipulation, Upfront Payments
• 07:00–10:32 — Incompatible Revenue Stories, ARR Deep Dive
• 12:01–13:50 — Compute Costs, Cloud Spend, and Ramp Projections
• 14:50–17:54 — Skepticism, Industry Spin, and Historical Parallels
• 16:28–17:54 — Final Plea for Transparent Metrics and Caution

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Conclusion

This monologue lays out a compelling case that the current profitability claims by Anthropic are, at best, a clever act of “financial engineering,” enabled by nonstandard accounting, vendor discounts, and a credulous media environment. Zitron’s warning is clear: Until the underlying cost structure of AI businesses fundamentally shift, claims of actual profitability remain suspect—and true transparency is yet to come.

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Transcript

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Callzone Media hello and welcome to a

[AI Industry Analyst]

very special Better Offline monologue. I'm your host at Zitron. 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 Ebitda 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 doll its home. Interesting. That'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. 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 requ requirements of a public company. That's right. Anthropic is possibly going to be EBITDA profitable for a single quarter on a non GAAP so Generally 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 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 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 is S1. Pursuant to its agreement, Anthropic will pay SpaceX 1.2 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 costs 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 Nvidia'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, 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? I got a few guesses other than the obvious way in which they reduce 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 perf legal, because this isn't non gaap, this is non GAAP accounting. Like you could just, you could say whatever in a real company or 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%. It again may be booking this upfront 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. On February 12, 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 3, 2026, Wario Amadei would claim Anthropic had reached $19 billion in ARR, so about $1.58 billion per month. Three days later, on March 6, 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 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 do 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. No one wants to talk about this at all. It makes makes them uncomfortable and angry, I assume. Probably because it's impossible to reconcile. 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[AI Industry Analyst]

If we assume that the ARR claims made by Anthropic are 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 6. 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 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 Anthropic's leaks Putting aside all the air 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 of 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 defense that anybody has here is that Krishna Rao under oath lowballed the US government and adjudged to such a dramatic extent that he hid nick 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 3, 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. Dario 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. 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 cost, $7.25 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. 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 gaap ebit to profitable based on a two month long discount specifically covering the period in which you're profitable. I will give Dario Amadei 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. If 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 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 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 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. 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 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. Costs increase linearly with revenue and will continue to do so in perpetuity. I genuinely can't wait for OpenAI and Anthropic to file their goddamn S1s.

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