Character.ai bankruptcy filings reveal unsustainable AI business model

Character.ai has entered bankruptcy proceedings; court documents show its business model cannot sustain expenses. The company spent $13.8 million per month on AI computing power in 2024 and $10 million in 2025, while peak subscription revenue was only $2.8 million per month, with total peak revenue including advertising reaching $5.3 million; computing power expenditures from January to August 2026 totaled $56.1 million, and as of August, it was still losing approximately $8–9 million per month.