I think Anthropic and OpenAI have found product-market fit
by simonw on 5/27/2026, 4:39:13 PM
https://simonwillison.net/2026/May/27/product-market-fit/
Comments
by: trjordan
They've got, ballpark, $5t to $10t to make back in the next 5 years, or the hardware buildouts will start getting written down.<p>This means we're going to need $1t+ per year in spending, per year, on tokens. 200m knowledge workers in the world, 30m developers. We're talking about a world where you need 5% of every knowledge workers salary to go into tokens. 20% if you're a developer.<p>That's a _huge_ shift. Most people I know cite +20%-40% velocity with these tools, against the actual work their company cares about doing. +20% speed for +20% spend isn't going to motivate a trillion dollars a year in spending.<p>We're not there yet. This is still the upswing of the hype cycle, and unless we figure out how to make developers 2x, 5x, 10x as productive on stuff that matters, this isn't going to play out well.
5/27/2026, 5:27:21 PM
by: hansmayer
> Anthropic are strongly rumored to be about to have their first profitable quarter<p>No, its more like their own leak to WSJ and according to Ed Zitron -> seems to be heavily engineered via non-GAAP practices such as counting <i>potential</i>, but not realised revenue as actual revenue - the stuff for which I would be arrested if I did it at my company.<p>Also it appears according to Ed's analysis - strangely they seem to be projecting only that one quarter as profitable - potentially to calm the investors ahead of the IPO. Investor fraud anyone?
5/27/2026, 6:25:46 PM
by: aerhardt
I find this analysis confusing. PMF for coding was likely reached some time last year. Profitability, which is different, we don’t know. The article kind of confuses both without making a strong economic case or using numbers in a compelling way. I don’t understand what the Uber case has to do with this either. The Uber COO clearly said that at least in terms of ROI he’s not seeing the results either.<p>My take is the product has been very useful for coding (PMF) for months. But it’s certainly not useful <i>at any cost</i>…
5/27/2026, 6:27:37 PM
by: bambax
> <i>That’s $2,180.16 worth of tokens for $200</i><p>So the author claims he's getting $2000 per month worth of frontier AI free of charge. Ok. If he's been doing that for 6 months that's $12k. What has this produced concretely? For $12k you can find a used car in decent condition. Heck for $1200 (his actual out-of-pocket spend) you get a brand new ebike! (on which you could put a pelican and make a photo of both if that's your fancy). But here it's unclear what has come of it.
5/27/2026, 7:46:13 PM
by: prepend
> $2,180.16 worth of tokens for $200<p>“Tokens” don’t have an intrisic cost or value. Saying that I used $2,180.16 worth of tokens is like relying on the salesperson to convince me I’m getting a billion dollars worth of pots and pans for $19.99.<p>I think it’s funny how we are throwing critical thinking out the window when it comes to evaluating biased sources of info.
5/27/2026, 5:29:16 PM
by: binary0010
So how do openai and anthropic plan to keep customers when GLM-5.1 is just as good and open source and a lot cheaper?<p>I don't see the business model working. My closest friend actually does automation software for large companies.<p>He does not use Claude or openai at all. He primarily uses gpt 120b on cerebras and glm-5.1 for heavy thinking work. And some other small models for various tasks. All open source.<p>And these systems are extremely useful for the businesses and are able to run fully automated pipelines that are very stable and fast.<p>We discuss this a lot, and we both think any business doing heavy agentic work on Claude and openai just aren't aware of exactly how good and cheap open source has gotten on the last year.<p>So... once the legacy businesses and developers catch up, won't Claude and openai be unable to recoup their costs?
5/27/2026, 5:27:41 PM
by: hintymad
The real timing is that we don't have strong enough new business needs for now and we have accumulated enough tech assets, so our work has been increasingly incremental. That means we can build reliable features on top of vast amount of past work - where AI really shines. So, with or without AI, companied would hire fewer software engineers if majority of our work is incremental: add a feature here, fix a bug there, tweak a configuration and etc, then we wouldn't need as many software engineers anyway. AI just accelerated such squeeze.<p>In contrast, imagine if we had the same AI 20 years or so ago. Could AI really write Jersey? I guess not as people were still trying to understand JAX-RS. Could AI really answer all the questions about React? I guess not as React was just invented. Would we use 10x fewer people to build out infra on the public cloud or the entire so-called Big Data platforms? I guess not, as they were still rapidly evolving and we'd need so many engineers to explore so many different possibilities? Could we use AI to build our ML ecosystem with 10X fewer people? I highly doubt so. Heck, 20 years ago R was all the rage and Python's ecosystem was not mature at all. Oh, and mobile computing, could AI lead to 10X fewer people to build all the mobile apps and the underlying infra?
5/27/2026, 6:58:53 PM
by: realo
200$ per month per seat is nothing .<p>A single 3D CAD license pack for the guys in our R&D group costs multiple thousands of dollars per seat, per month.<p>It's about time software seats get some love too.
5/27/2026, 5:34:13 PM
by: antman
The costs are exorbitant and most software is not produced by companies with such a huge moat. Anthropic made a profit through their recent bait amd switch pricing. There is zero useful insights online to indicate whether this might die due to commoditisation with good enough open models or fail the race to get more people subsidising unsustainable growth with other people’s money. Who knows? In any case they dont seem to be able to drop usage costs so the business model seems based on wishes
5/27/2026, 5:40:08 PM
by: darth_avocado
How is the lack of bad news declaring a victory for AI? I am yet to see any company concretely publish analysis about the ROI from AI. Most companies as far as I know are still treating AI investment as sunk cost with no expectation of returns at the moment. We could very well see a world where companies heavily scale back investment.
5/27/2026, 5:41:55 PM
by: sourcecodeplz
With deepseek and xiaomi mimo models slashing their prices 99%, I don't see a great future for openai / antrhopic with regards to their 1T valuations. Maybe 1T valuation will be the whole market, West + East.
5/27/2026, 5:24:56 PM
by: atleastoptimal
I think this was obvious since the birth of ChatGPT<p>Intelligence is a universal good, it can apply to anything, and no, "human intelligence" is not the only form that is useful nor special. There are limitations to AI but also huge advantages, and its obvious that the advantages are worth paying for, given their revenue.
5/27/2026, 7:36:50 PM
by: mtrifonov
They certainly have, but it relies entirely on the assistant frame, which is a problem in and of itself for the trillion-dollar economics.<p>Anthropic and OpenAI have shown people want a tool for task offloading, driving predictable token consumption and justifying the math, so long as users stay in that dynamic.<p>However, knowledge workers using these tools daily are getting exhausted with them. Outputs come out polished but hollow. Talking to a frictionless, frame-completing model all day drains you.<p>If user behavior drifts away from assistant usage because of that, per-token math implodes. The valuations we're hearing about all the time rely on usage compounding daily. The fatigue is a timer running against that compound.<p>Anthropic's Constitution is the closest hedge out there, I think. Installing an identity structure into the model through training. But it's still assistant-first, so the fix there is only partial.<p>I've spent the last year running a product that flips the architecture so identity is primary and the assistant role is secondary. Same frontier models, completely different conversational quality. The fatigue property doesn't really show up.<p>Whichever labs figure out how to install real identity natively in the weights are going to be the ones with PMF in the next phase.
5/27/2026, 6:49:39 PM
by: cj
> Coding agents really did change everything. These are tools which burn vastly more tokens<p>The assumption here is that this is a positive thing.<p>But this very well could end up being a major negative long term by increasing the cost per user, reducing margins.<p>More usage = more cost = less profit.<p>It's not obvious that more usage is good. It's only good if revenue per user increases more than cost does. I'm skeptical about that.
5/27/2026, 6:55:13 PM
by: Szpadel
> but as far as I can tell those credit costs are an exact match for the API token costs listed for those models.<p>it is only true for USD. for example if you pay in euro, this is actually more expensive. kind of makes no sense, because it translates to $1 = €1
5/27/2026, 7:24:17 PM
by: smokel
Does this analysis factor in potential caching of tokens on the server side? It seems that if they organize things well (as a model provider), they can save quite a lot on that. Looking at my Cursor statistics makes it clear that the token calculations are not at all trivial.
5/27/2026, 5:44:04 PM
by: CachedaCodes
Ai has become indispensable but maybe not at all cost. My company just had a company-wide meeting to talk about how they're restricting who can use which models and instructing us the "be more responsible with company's tokens". And it's not an small company by any means.
5/27/2026, 5:20:23 PM
by: dnnddidiej
Is PMF enough. It is such a dynamic self-disrupting wave that it is like predicting physical chaos. These aren't early Googles in a blue ocean. Maybe a blue ocean full of pirates and dragons!<p>This isn't me being a doomer I just don't know. Can we look at Q2 profits and draw hockey sticks yet?<p>Remember people are boasting how much their expenses are. That is where we are in the bubble/new paradigm.
5/27/2026, 7:06:48 PM
by: asim
Love how everyone boasted about replacing all the software with ChatGPT and then we end up with coding agents meaning the software engineer are STILL important. The sell is the development tool. It's classic cloud. Where did all the ops people go, many got subsumed by the cloud companies YET every company still has DevOps people to manage cloud infrastructure. The layer of abstraction went up but we still need the people to write the glue code and understand the business. OK great there's a new cash printer in the room. There's a new tool. Let's just start to ground the tooling in its new found gravity, profitability and IPO market dynamics... Reality has set in. The hype cycle is about to explode... Do you remember ride hailing and just how much cash was burned on credits pre Uber IPO. Then remember the IPO itself? These companies are not the new Google. They are a layer on top. Google was still the most efficient cash printing machine in history beyond the the US government and might still be. Will be interesting to see what the trillion dollar IPOs turn into. I'm going to say we see those prices get cut to a third in less than 5 years and scale back up over the next 15-20 years.
5/27/2026, 6:08:52 PM
by: firesteelrain
Anyone actually making money paying all of these monthly fees? Or just hobbyists? I have yet to see any real ROI posted anywhere.
5/27/2026, 6:06:10 PM
by: rubiquity
I think it's fair to say they had achieved product-market fit when their revenues were growing deep triple digits month over month. What we're seeing now is that perhaps they have achieved profitability or at the least a more sustainable balance sheet.
5/27/2026, 6:19:14 PM
by: hansmayer
> I currently subscribe to the $100/month Max plan from Anthropic and the $100/month Pro plan from OpenAI. If you are a heavy user of coding agents these plans are a fantastic deal.<p>Agreed. But its only a great deal because it is heavily subsidized, as you said yourself. Enjoy while it lasts, but in my book, product-market fit means something along the lines of "product which enjoys a loyal customer base, sold at a price perceived fair by the customers, and generating profit. How many of these does your definition of product-market fit hit here?
5/27/2026, 6:30:35 PM
by: osigurdson
Realistically, OpenAI found product market fit with the OpenAI API playground in 2021. People were using that as ChatGPT at the time.
5/27/2026, 5:47:03 PM
by: smallerfish
I think the reasons for them going with API pricing will become abundantly clear when the S-1s become available. If they don't have a story covering how they can get revenue closer to expenses, then they're relying on the market to believe the pixie dust version of their profitability story, which I think people increasingly don't.
5/27/2026, 5:38:45 PM
by: NortySpock
"[would have spent] $1,199 with Anthropic, $980 with OpenAI"<p>How many tokens is that, input/output-wise?<p>(a) I'm curious if you feel like you got $2000 worth of value out of them in the last month?<p>(b) I'm also curious if you would have gotten similar quality out of a slightly lower-cost provider of an open-weight model? (e.g. Kimi K2.6 and DeepSeek v4 Pro) and what the spend would have been for that.<p>I myself have managed to spend not quite $4 on OpenRouter and have felt it was very worth it; I just have much smaller, or more targeted requests I guess. (Lately, adding features to a static site generator in Python, or setting up log forwarding via a docker compose file)
5/27/2026, 6:10:52 PM
by: mbesto
> but I suspect there’s a more important factor here: I think they’ve finally found product-market fit<p>Ahhh the classic startup term that's definition is nebulous. But also, since when does any definition of product/market fit mean a product is profitable? And profitable in what sense? Unit economics? Overall company?
5/27/2026, 6:48:23 PM
by: Hasz
Mentioned in the article, but it cracks me up that both openai and anthropic are utilizing fairly traditional enterprise GTM plans segmented by verticals.<p>So many startups trying to automate sales, but somehow the two biggest frontier labs have decided that the best GTM strategy is firmly human-in-the-loop.
5/27/2026, 6:44:34 PM
by: Havoc
What baffles me is the range of estimates.<p>Operating profit is both post depreciation and fees paid to third parties for hire. So aside from shenanigans like RSUs and financing interest that's already somewhat close to actual economics.<p>Meanwhile we've got commenters here talking of 5-10 trillion with a T revenue shortfall.<p>Those are very different takes on reality
5/27/2026, 6:34:15 PM
by: spprashant
So it largely sounds like many more people will be able to write software - and will use AI to do it. Existing software engineers will continue to automate their tasks away like they always did, but perhaps at a faster rate.<p>The impact of AI in other fields seems to be muted.
5/27/2026, 5:18:04 PM
by: mesmertech
If nothing else this blog did give me the idea that I should split my $200 claude max plan into two $100 CC max and $100 codex plan, esp because Claude is now offering 1.5x weekly limits so its the 5x usage is now more like 7.5x usage.
5/27/2026, 5:27:45 PM
by: pzo
> If you are a heavy user of coding agents these plans are a fantastic deal. I just ran the ccusage tool on my laptop to get an estimate of how much I would have spent if I were to pay for API tokens in the past 30 days and got<p>You think this is fantastic deal only because they use similar like tricks where they inflate the price and tell you something supposed to cost $1000 but they have this today promo for $100.<p>I was there too and paying for a while. Few weeks ago I tried DeepSeek V4 Pro - expected its gonna be shit but its actually pretty good.<p>The deal is I pay daily ~$1 for DSV4-pro for ~100M API token usage. And they probably not getting broke because >90% of those token in practice is cache read and they very well optimized for that.
5/27/2026, 6:48:08 PM
by: vb-8448
> That’s $2,180.16 worth of tokens for $200—not bad at all!<p>Just imagine how funny it will be if it comes out that big labs were doing some fancy maths to count the 2k$/month in their forecasts ...
5/27/2026, 7:15:32 PM
by: x187463
I wonder how a focus on per-token API profits will impact the incentives to improve token efficiency and drive down costs through optimized compute. I suppose as long as a few leading labs are competing, we'll see progress in this regard, but it's certainly less in their interest than it is with a flat subscription pricing model.
5/27/2026, 5:24:51 PM
by: zuzululu
Great article I know this upsets a lot of people who are used to thinking Anthropic/OpenAI are just lighting cash on fire but they've cornered the market on enterprise who cannot walk away from these $200/month plans<p>However the valuations are still far far away from actual sanity
5/27/2026, 5:27:16 PM
by: airstrike
Who's to say those enterprises won't churn after XYZ comes out with a decent enough model that costs 10x less to use?<p>There's a whole bag of clever tricks you can play to juice short term results leading to an IPO that may not work longer term.<p>I'll believe they've found product-market fit when they have a product. Right now they're selling the infrastructure, in a highly subsidized and undifferentiated way (at least over a sufficient long period of time of, say, a couple of years).
5/27/2026, 5:50:14 PM
by: wewewedxfgdf
Simon Willison just hit the "Publish to top of HN" button.
5/27/2026, 7:21:40 PM
by: vb-8448
I'm a huge fan of agent coding but kinda dislike this "llm evangelism".<p>There are still several open points (eg.: code churn, maintainability, subtle bugs human will never do) that everyone with a minimal programming knowledge that seriously used a LLM agent knows about but somehow none of these "big influencers" never mention (or just saying "it's your fault").
5/27/2026, 7:11:20 PM
by: _verandaguy
With respect to Simon, whose writing I've usually agreed with in the past and whose insights I've liked: this is a bad take that overlooks the extent to which corporations are imposing the use of AI on employees, and in particular ICs, who make up a majority of the AI-using workforce by headcount.<p>Many of us are either openly having our performance reviews tied to AI use, especially at larger enterprises. Whether that's measured by sheer token count or just "how many of your tasks are you using AI for these days" (combined with the implication that question carries at many orgs which are heavily invested in AI).
5/27/2026, 6:50:24 PM
by: CuriouslyC
Companies are kool-aid drinking now due to hype, but given how much they're spending, if they don't see REAL, BIG wins from it soon, they're going to scale it back quickly and switch to Chinese models. Claude isn't worth the API cost for a lot of development work, and once companies have had time to collect and crunch data they'll see this.
5/27/2026, 6:02:11 PM
by: dude250711
<i>> Anthropic are strongly rumored to be about to have their first profitable quarter.</i><p>Is that quarter same as any other quarter in terms of infrastructure costs (e.g. are there any temporary discounts happening coincidentally)?
5/27/2026, 5:35:14 PM
by: Legend2440
>Somehow this fragment turned into headlines like Uber’s COO says it’s getting harder to justify the money spent on AI tokenmaxxing, because the market for stories about AI failures remains enormous.<p>I notice this all over the place. Many people hate AI and want it to fail, and they're willing to invent misinformation if it supports that idea.
5/27/2026, 5:34:40 PM
by: mschuller
yep, and the issue is, they took investment
5/27/2026, 6:40:12 PM
by: stego-tech
The big assumption with all of these sorts of analyses is that things will continue as they are for the foreseeable future.<p>In hype-driven markets, you <i>cannot</i> be certain of that.<p>Let's take a view that the author is right: coding agents and their associated harnesses were the inflection point for some degree of profitability and widespread consumption, and that these tools are now yet another SaaS subscription or API bucket expense to bake into every single developer (or developer-adjacent) in the organization alongside your collab suite, HR seat, CRM seat, design seat, etc. To be fair I <i>honestly think</i> that's a safe assumption to make for highly technical firms whose image is derived from remaining on the cutting edge of things.<p>That begs the following questions, which we won't know until IPOs start happening:<p>* Are subscriptions profitable, or just API consumption?<p>* What's the run rate when we just consider subscription-based usage like Claude Code and Codex? What about API calls?<p>* Is there any profitable pathway forward at which enterprises can get unlimited usage but at fixed rates via subscription?<p>* What does customer churn look like for subscription users versus API users?<p>We also have a number of questions for customers that I suspect we'll start seeing receipts for in the coming months, at least from the early adopters:<p>* What was the net gain (loss) from leveraging coding agents?<p>* What's the cost of a developer with or without access to a coding agent + harness? Is it cheaper to hire an outsourced worker with a coding agent subscription, or a domestic worker without one?<p>* At what point does further AI spend result in diminishing returns, i.e. where's the 'sweet spot' for spend?<p>* Did AI boost actual revenue and outcomes, or did it just gamify KPIs?<p>* What roles or work did AI actually replace, versus merely displace during the hype cycle?<p>Not to mention the questions regarding the technology itself:<p>* Will we develop the means to run foundational/frontier models at edge using less resources through some existing (e.g. distillation) or new technology, thus cutting off the profit centers of these firms?<p>* When the market mismatch between supply and demand is resolved, won't it be more affordable for consumers and companies to operate their own AI infrastructure rather than support further centralized buildouts?<p>* Will coding agents improve to the point of being able to bootstrap and self-orchestrate on edge/consumer hardware without substantial technical expertise, or at least improve to the point that traditional IT teams can securely operate them internally without an expensive subscription or API token bucket?<p>All of these will influence the long tail of this bubble, because it <i>is</i> a bubble at this point. Even if these companies are indeed profitable thanks to the coding agent inflection point, there's still so many unanswered questions about utility beyond coding that it's impossible to extrapolate a future. If coding agents are indeed the extent of utility for profitability, then there's <i>no possible way</i> these entities will recoup the investment already sunk into their infrastructure buildouts. Even if more profitable uses are discovered, does this offset or replace the firms disappearing due to AI speculation and their associated contributions to the economy as a whole (RE: the consumer compute industry at present, higher energy costs due to datacenter builds, opportunity cost from harms to local infrastructure from haphazard builds, etc)? Should these firms indeed be runaway successes and immensely profitable to the point of paying off their investors and growing the larger economy, does this end up stifling innovation in a world where most new ideas are fed into LLMs for R&D that are then controlled by only a handful of companies and immensely wealthy people, via systems that are easily surveilled and stolen from without recourse?<p>So many, <i>many</i> questions yet to be answered. Betting the farm because of coding agents is one hell of a gamble.
5/27/2026, 6:57:22 PM
by: stanleydupreez
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by: harmonic18374
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5/27/2026, 5:25:23 PM
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5/27/2026, 5:25:42 PM
by: trusted_bro
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5/27/2026, 5:44:47 PM
by: bellowsgulch
How will they stay profitable if every business lays off engineers because of AI and there are no engineers to use it? /s
5/27/2026, 6:22:35 PM
by: enraged_camel
I wonder how Ed Zitron will shift goal posts this time, and how long it will take for that article, when published, to reach HN front page.
5/27/2026, 6:05:40 PM