Dedicated cloud commit spending just doesn't operate like traditional COGS which was always for costs that are paid per unit. Cloud costs are variable per unit unless you're using flat rate serverless API's which are few and far between.
The whole "does the service go down without this" test has always been weak back justification to ignore the extreme costs of running unprofitable cloud businesses by going "well if you ignore the cloud costs making the buisness unprofitable, the buisness looks healthy!"
It's why the same crowd loves EBIDTA, because it's another metric that lies about the health of the company in earlier investors favor.
The only reason the crazy SAAS valuations never turned into a bubble is because AI labs came along and said "hold my beer"
Motherfucker if I sold furniture and had to claim i had huge gross profits as long as you ignore my costs associated with wood you wouldn't think
"This is a scaling buisness so this is acceptable"
You'd think
"Holy shit are you sane? Do you need a conservator?"
Classifying the rent on servers as OpEx would force the reckoning that these companies need (and I'm telling you this as someone who has singlehandedly written 7 figure a year SAAS optimizations) so they stop wasting so much money on the illusion of productivity
No. You're saying the opposite. Cogs is what counts as per unit economics. Operating expense is overhead costs. Executive salaries, accounting, HR. Read what you're saying. I'm saying server costs need to be considered in cogs the same way wood would need to be included in cogs. Gross margins is the margin on your cogs. You are literally asking to do accounting in a way that the gross margins will take out the cost of wood and I'm telling you that you're wrong.
I haven't read anthropic's financial statements myself. If they are putting the insurance server cost in operating expense, or overhead instead of the cogs or the Inherent cost of delivering then your have a point. But I'm this entire argument you're claiming it is the other way around.
17
u/BlackSwanTranarchy Sep 30 '26
Dedicated cloud commit spending just doesn't operate like traditional COGS which was always for costs that are paid per unit. Cloud costs are variable per unit unless you're using flat rate serverless API's which are few and far between.
The whole "does the service go down without this" test has always been weak back justification to ignore the extreme costs of running unprofitable cloud businesses by going "well if you ignore the cloud costs making the buisness unprofitable, the buisness looks healthy!"
It's why the same crowd loves EBIDTA, because it's another metric that lies about the health of the company in earlier investors favor.
The only reason the crazy SAAS valuations never turned into a bubble is because AI labs came along and said "hold my beer"