Outsourcing plus LocalAI will soon become more economical vs. Frontier labs

Re:Outsourcing plus LocalAI will soon become more economical... by wongarsu on Wednesday May 27, 2026 @04:28AM (#48291348)

There we go back to the original question: are subscriptions profitable, API pricing wildly profitable, and they just lose all that money on fixed costs like model training; or do they actually barely make money on inference?

That's why talking about the profitability of inference without accounting for model training is interesting, because that is the deciding factor in whether more customers would help getting them in the green

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Re:Outsourcing plus LocalAI will soon become more economical... by dminik on Wednesday May 27, 2026 @09:29AM (#48294060)

Without actual data I don't know. My gut feeling is that they overall lose money on subscriptions (and especially the free tier that accounts for 95% of all users). And make thin profit (~5%) on API pricing.

But it's just that. A gut feeling.

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Re:Outsourcing plus LocalAI will soon become more economical... by Forgeties79 on Wednesday May 27, 2026 @06:59PM (#48301917)

I don’t think it’s a gut feeling. It seems to be the consensus that subscriptions are still heavily subsidized

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Re:Outsourcing plus LocalAI will soon become more economical... by anthonypasq on Thursday May 28, 2026 @11:58AM (#48310815)

its well reported that inference margins on api pricing are 30-50%

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Re:Outsourcing plus LocalAI will soon become more economical... by dminik on Friday May 29, 2026 @06:31PM (#48330181)

No it's not. It's well speculated. Can you give a single source that says they have a 50% margin on inference?

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