Their net loss is quite strange. It's like $38.5 billion. But the number I like to come back to is they lost $21 billion from operations. And they spent astronomical amounts on sales and marketing. They spent $7.5 billion on cost of revenue, $19.18 billion in R&D. But that sales and marketing cost, that $5.73 billion is one I really like to hammer on because what it's like just like it's just like excuse me. Well, how much did you spend?
Welcome to Profit Markets. I'm Edson. It is June 17th. Let's check in on yesterday's market vitals. The S&P 500 and the Nasdaq declined as chip stocks sold off. Meanwhile, the Dow hit another all-time high. Brent crude fell lower. The yield on 10-year Treasury slid ahead of the Federal Reserve's interest rate decision due this afternoon. On Kalshi, the odds that the Fed holds rates steady are at 99%. And finally, SpaceX stock popped another 15% early in the day before pairing back most of those gains. It is now roughly as valuable as Amazon. More on that later. Okay, what else is happening?
OpenAI's financials were just leaked and the numbers are wild. The company hit $13 billion in revenue last year, up more than 250% from 2024. But the number that has everyone talking is how much OpenAI lost last year. The answer, $39 billion. Meanwhile, the company has just filed to IPO and plans to go public later this year, which begs the obvious question, is this kind of spending sustainable? So to dig into these numbers, we are speaking with the man who actually broke this news, the guy who found the financials, and that is Ed Zitron, author of the Where's Your Ed newsletter and host of the Better Offline podcast. Ed, it's great to see you. Thank you for joining us once again. I know you've had a busy day because you literally just reported these financials. I'm not going to ask how you got your hands on them, but what I do know is it's been independently verified, audited by the Financial Times. These are real numbers. You found these numbers. Take us through them. What should we know about these financials?
So, last year, OpenAI spent about $34 billion to make about 13.01 — sorry, 07 billion — and had about $22 billion in cash at the end of the year. Lost about $21 billion. That 38, 39 billion number is what I would describe as GAAP voodoo. There is some very strange stuff, and I'll be going into this in future episodes, going on in the balance sheet and everything with this company. They turned from a nonprofit to a for-profit, though they've remained profitless last year, which means that they have — their net loss is quite strange. It's like $38.5 billion. But the number I like to come back to is they lost $21 billion from operations, and they spent astronomical amounts on sales and marketing. They spent $7.5 billion on cost of revenue, $19.18 billion in R&D. But that sales and marketing cost, that $5.73 billion, is one I really like to hammer on because what it's like just like it's just like excuse me. Well, how much did you spend? Because the thing is here, there could be — I think that there's a potential that that could be partly passed through to Microsoft with the revenue share. I truly don't know. This is just me guessing. But nevertheless, that's an extreme cost. But another thing to note is $856 million — so about 6.6% — sorry, $867 million. So about 6.6% of OpenAI's revenue last year came from SoftBank. Now I truly don't know what that's for. They have a thing called Crystal Intelligence. I'm not kidding. It's actually called that. Spelled the same way, too. And but that's a very alarming number because that's a huge amount of revenue from one partner that I don't think was probably causing their COGS to spike at all. That's a large amount of their revenue coming from a single partner that is more than likely just — I mean, I can assume not like Crystal Intelligence is not launched anywhere. It's only — it took a few months to even get out the door. It was announced in February 2025. Took until the end of the year to hear anything about it, but they still paid nearly a billion dollars. It's very concerning. And it also suggests that OpenAI's growth is not quite as fast as we believe, too.
Right. Just going back to the losses here because this seems to be the most important thing for investors to understand is how much money are they burning really? The number that I saw, the net loss that was reported by you and by the Financial Times independently — I know you guys looked at the same document, but there are a lot of numbers on there and it gets a little confusing. The number I saw was 38.5 billion in net losses, up eightfold year-over-year. Now there was some nuance in here because, as you pointed out, when you take into account these other factors like interest income and interest expense, the number goes up to $60 billion. And you pointed out that they lowered that number by taking that stuff out. But then the Financial Times also spoke with someone quote familiar with the matter. And this person who was familiar with the matter said that the reason that that number was so high was because as OpenAI's valuation went up, they had to create this $30 billion charge in investor rights, which I kind of understood to be stock-based compensation. And so their argument was when you adjust for that, the real net loss is closer to $8 billion in losses. All of this is obviously very confusing and I don't fully understand it. So I just want to get your view on how do we make sense of this because there's a lot of numbers, a lot of nuance, and I'm not fully sure what it all means.
So I did not speak to the person familiar with the matter. I do not know who they are. I think that's wank. I'm just going to be completely honest. You spent — you spent $34 billion to make 13.07 billion dollars. You didn't just lose eight billion dollars. Stop. Like when I read that comment, I did a big chuckle and I knew all the boosters would all get hot and heavy and be like, 'Aha! The proof we need.' The numbers to look at are the actual costs and the actual revenues. These companies, OpenAI in particular, have lived high on the hog, spreading weirdness around numbers. The numbers to focus on on how much they're burning: $1.57 billion just on general administrative, just on people. And I don't even think that that includes all the people. It doesn't — I don't have any other knowledge to this because I don't have the definitions of these terms from within the sheets. But the thing is here is this is a company with spiraling costs, dramatic costs way beyond what we thought, that is spending, and they put research and development in there and they market that. I believe — personal belief here — because they want people to think that this is a temporary situation, that this is something that will go away, that when there's enough R&D they can stop. No, no, no. R&D number going up very high. Everything is increasing. Every cost is increasing. And I think it's just a kind of a frightening sign of what the innards of these companies look like. And think about it like this. OpenAI has already said as part of the Musk trial that they're going to spend $50 billion on compute this year alone in 2026. Their losses are going to be astronomical. I don't have any privy knowledge to the 2026 numbers, but based on these, they could be burning 80, 90 billion. It's genuinely — it's genuinely horrifying. I'm glad that I got to tell this story before the S-1 is filed because I think people need to see what the innards of this company look like before they get a chance to massage them.
Yes. Yeah. I agree that actually one of the craziest numbers was the sales and marketing number up to 5.7 billion. It jumped 418% in one year. That's 44% of total revenue. And we just looked for context. When you look at Facebook's marketing, it peaked at 28% of revenue in 2008. Google's hit 11% in 2003. OpenAI is at 44%. So they're spending astronomical amounts of money not to build AI, but to sell AI to make it profitable.
And that does seem to be a real problem. I mean, just looking at the SpaceX IPO as a comparison point, when the S-1 came out, I wrote about it and a lot of people talked about it. I'm sure you talked about it as well. The numbers did not look great from a profitability perspective. We called it a money furnace, cash incinerator, etc. Because that's what was happening and continues to happen. The company is losing astronomical amounts of money, building mostly AI, also rockets, but AI is the real money loser. And yet the stock is flying right now. It's as valuable as Amazon currently. So I guess I'd be interested to hear what you think will happen when the S-1 finally does come out for OpenAI. Maybe these numbers aren't concerning to people or maybe they will be. I'd be interested to hear your views.
I think SpaceX's losses are — would — if OpenAI had SpaceX's losses, they'd be so happy. But then again, SpaceX doesn't have OpenAI's revenues, so who knows? I think that the reason SpaceX has flown in the way it has is because of the Musk reality distortion field and his ability to play Goldman and JP Morgan against each other. Both of them — everyone there should be ashamed of themselves for pumping this for what — just like, 'Oh, AI revenue will increase 300x in four years.' Putting all that aside, these are fundamentally different companies. Even though SpaceX has its horrible burning AI element, it still has Starlink. It still has the rocket ships and it also has the social network, but I don't know if I'd say that was a plus. It still has a functioning business. OpenAI has ChatGPT and API. That's it. Like they have — they can dance around being like, 'Oh, we got Jony Ive nonsense. Oh, we got like a consumer device. Oh, we got — we're going to do an everything app.' But they're just dancing around the fact that they have one product. They have one product with a few offshoots. They don't have ways of investing more money to make money. You mentioned profitability earlier. I don't think that's possible. I don't — like their costs are so severe that I don't think profitability is actually possible for any AI lab. I think that Anthropic is going to look similarly horrible. I think that the markets believe for some reason that things won't look this bad. I've been speaking to people all day about this and everyone's saying, 'Wow, I didn't know it would be that bad.' And I genuinely — I got to laugh a bit. It's like, 'Did people think I was kidding? Did people think I was — I was chuckling to like, oh, I just — I guess they were bad.' No, of course they were this bad. So I don't think that OpenAI and Anthropic have the nuance and also the aggressive bully mentality of Musk, though I really deeply dislike — to be clear — to do an IPO with the amount of that will be necessary to sell this dog. I don't know how because remember in the S-1 they're also going to have to do growth trajectory. They're going to have to say what they could grow into. I think it's — I think it's going to be difficult to float. They could theoretically, but I don't — considering how SpaceX is done, I think they have a higher chance than none, but at the same time, SpaceX's numbers were bad. These numbers are terrifying. These are scary numbers. And watching the cope Olympics on Twitter as people like, 'Well, actually, it's okay. You saw that quote, you saw the quote that said 8 billion. It's okay. They didn't actually spend 34 billion. I only spent $8 billion. It's okay. Nothing bad happened at all. Nothing weird.' And it's like it reminds me of — was the Comical Ali, the guy in the Middle East when he was like, 'Everything's fine here.' Was the Leslie Nielsen bit, was like, 'Nothing to see here, disperse, don't worry.' It's just very silly. It's all very silly because this is a company that spent $34 billion to make $13.07 billion and also $867 million of that was what looks like given to them by SoftBank. And that is not a stable or thriving business. This is a business that is just consuming capital at an alarming rate with no sign of stopping. They just raised $122 billion at the beginning of this year. I don't think they're doing that because they're going to get profitable.
Yeah, it does seem as though when this company goes out, when it goes public, and it appears it is going to go public — they have filed, plan is to go public in the fall — the valuation will be similar to SpaceX, almost entirely dependent on the CEO's ability to tell a compelling story that enough people buy into and believe. Elon is someone that you could arguably bet good money on doing that because he has a proven track record of being an incredible storyteller specifically to the markets on what his companies will achieve. Sam Altman, I'm not sure I back him to tell a compelling story or to capture the imaginations of investors in the markets because it's clear that the numbers aren't going to do it for him.
Well, also the other day I just — I had to go and check on this while we're talking. Here's the reason I don't think Sam — I agree with you fully. I don't think Sam Altman's got the head for this because when his customers started complaining about the cost, he said in a panel, 'Yeah, AI costs are a huge issue now.' You don't say that, Sammy. You don't — that's not — that's not what investors want to hear. You say — you make some crap up about how like, 'We're doing cost adjustments, but people are really excited to see what they can do with AI.' You don't go, 'Yeah, that's a huge problem.' Like what's he going to do on the roadshow? They're going to be like, 'Yeah, you keep losing money.' Yeah, you know. You got to lose money to lose money.
Yeah. Yeah. It's certainly very concerning. Well, we're going to wrap this up, but Ed Zitron, we always appreciate it. It's amazing that you got your hands on this. It really is so important. I mean these companies, the size and the valuation and the sense in which they are becoming in a lot of ways systemic to this market and to expectations of this market is so important and now we've finally gotten some transparency into what's really going on here. So we appreciate it. Ed Zitron is the author of the Where's Your Ed newsletter. Also the host of the Better Offline podcast. Ed, appreciate your time.
