Character.AI files for Chapter 11 bankruptcy protection; 20 million monthly active users fail to cover compute costs

Character.AI announced on October 12, 2026 that it filed for Chapter 11 bankruptcy protection; if the sale process cannot find a suitable buyer, officials said it may shut down. Its monthly active users once reached 20 million, but monthly compute costs were about $10 million, subscription revenue peaked at about $2.8 million, and total revenue was at most about $5.3 million a month; before bankruptcy it was still losing about $8 million to $9 million per month. The company also faces lawsuits and regulatory pressure over minor safety, with attorneys general from 40 U.S. states asking the court to protect sensitive data of minors remaining on the platform.