âInference is low-marginâ is maybe not quite right. Inference is low-margin relative to zero-marginal-cost software businesses, but itâs plausible that compute profit margins can be robust for inference (especially as hardware improves).
OAI cited a 70% compute margin in 2025, but this is based on a blend that includes monthly subscriptions with low usage. No lab, afaik, has released a per-token API profit margin.
Margins are more complicated for inference vs widgets in a factory because R&D spend is so high (and increasing superlinearly). R&D is a mandatory continuing cost to retain usage.
I donât think itâs quite right to say that frontier labs have an amazing business, compared to, say, producing widgets in a factory, because margins are (guessing) 33%, given the structure of the business.
Also, as models rely increasingly on TTC, does this meaningfully reduce compute margins?