Chai Research Corp.2026Strictly confidential

Character AI bankruptcy –
CHAI investment 2026

Character AI is selling its assets in Chapter 11. CHAI is raising $20M–$40M to bid for the app and its $65M/year revenue.

$65MCharacter AI annual revenue
$20MDisney's bid, for non-exclusive IP rights only
10xCHAI's revenue per user vs. Character AI's
Nov 20Auction date; financing is needed before then

Chapter 11 asset sale

The opportunity

Our competitor Character AI (CAI) has filed for Chapter 11 bankruptcy and is selling its assets. It has $65M/year in revenue. Disney has bid $20M for non-exclusive rights to Character AI's IP; that bid does not compete with ours, which is for all of the assets, including the app, its users and its revenue.

CHAI's revenue per user is $0.44; Character AI's is $0.04. Character AI is heavily under-monetized, despite sharing a similar user base, demographics and user retention.

Given we increased our own user monetization by 6x over the past year, we think it is safe to expect Character AI's revenue to grow 1.5x–2x within a year, using simple, in-house monetization strategies.

CHAI$0.44revenue per daily active user
Character AI$0.04revenue per daily active user
Gap10xlower revenue per user at Character AI, with a similar user base

Track record

Revenue growth

  • CHAI Revenue1 134.6M ARR
  • Character AI Revenue2 65.0M ARR

Annualized revenue

Revenue per user

Revenue per DAU ($)

  • CHAI ARPDAU3 $0.44
  • Character AI ARPDAU4 $0.04
Opportunity:C.AI has 10x lower revenue per user than CHAI.

Touch or hover a chart to read values. Readouts are traced from the source charts and are approximate.

Notes: (1) Trailing 30-day revenue, annualized. (2) Character AI revenue estimated from Sensor Tower, calibrated to the $65M run-rate in the CIM. (3) ARPDAU = annualized revenue ÷ 365 ÷ 30-day average daily active users. (4) Character AI DAU estimated from Sensor Tower, calibrated to the 4.2M DAU in the CIM.

Source: Company data, Sensor Tower, Character.AI CIM (2026).

Five-year outlook

Revenue projections

Character AI generates $65M/year today from its existing users. Below we project that revenue for the five years after a January 2027 close under three scenarios. Each scenario applies CHAI's monetization to the existing Character AI user base; no user growth is assumed.

  • Baseline 1.5x, flat

    Revenue rises 1.5x in the first year as CHAI's monetization is applied, then stays flat.

    Five-year total $488M
  • Median 1.5x, +20%/yr

    1.5x in the first year, then +20% per year as monetization keeps improving.

    Five-year total $726M
  • Optimal 2x, +25%/yr

    2x in the first year, then +25% per year.

    Five-year total $1,067M

For reference, CHAI's own revenue per user grew 6x over the past year; the 1.5x–2x first-year uplift is the range from the previous section.

Projected revenue per year, M$

  • Baseline (1.5x, flat)
  • Median (1.5x, +20%/yr)
  • Optimal (2x, +25%/yr)
  • 2026 actual run-rate

Projected cumulative revenue, M$

  • Baseline (1.5x, flat) $488M
  • Median (1.5x, +20%/yr) $726M
  • Optimal (2x, +25%/yr) $1,067M
Projected revenue by year, M$. Close in January 2027.
Scenario202620272028202920302031Cumulative

Notes: Illustrative; assumes $65M of current annualized revenue from the existing Character AI users, closing in January 2027 and no user growth. The 2026 bar is the current run-rate. Scenario uplifts and yearly improvements as described above.

Source: Company estimates, Character.AI CIM (2026).

Questions

FAQ

What is Disney's role?

Disney has acquired the team. Character AI's CEO is now the CTO of Disney. Disney is not interested in the users or the app; instead, it wants to add generative AI to its own products.

Disney has bid $20M for non-exclusive rights to CAI's IP. Because those rights are non-exclusive, Disney's bid does not compete with CHAI's bid, which is for all of the assets.

What assets does CAI have?

CAI has a user base of subscribers and users who watch ads. This generates $65M a year.

We think we can grow this to $100M a year within 3 months.

Where are the legal risks?

CAI has outstanding litigation. The purchaser of the app will not inherit any existing lawsuits or regulatory challenges.

CAI advertised its app to teenagers, which exposed it to lawsuits in the US.

CHAI has never advertised to minors. Our app has always been for adults.

If CHAI's bid is successful, we will insist on age assurance and verification for all users.

What is the timeline?

The auction for Character AI will take place on November 20th, so financing needs to be secured before that deadline.

How would the investment be structured?

We are open to suggestions. This is an attractive opportunity and can be financed with equity, debt or even a revenue share.

Funding the bid

Ask

$20M–$40M

We are raising $20M–$40M to fund the bid. If you are interested, please email will@chai-research.com.

The auction takes place on November 20th. Financing needs to be secured before then.

Email Will
Signed by: William Beauchamp Founder & CEO