Chinese AI startup nears $1 billion in revenue while releasing top-tier models for free

China's leading AI startup Z.ai (formerly Zhipu) is projected to hit $1 billion (about 1.3 trillion won) in annual revenue. This would be the first such milestone among independent Chinese AI companies. Z.ai is accelerating its growth through a "monetize while open-sourcing" strategy, at a time when Western AI companies are struggling to make this approach work.

Z.ai's 2025 revenue rose 132% year-over-year to approximately $100 million (724 million yuan). JPMorgan projects that 2026 revenue will grow to about 4.6 billion yuan, with the company turning profitable by 2028. Currently, a significant portion of revenue comes from on-premises deployments for state-owned enterprises and solutions for financial institutions, while API-based open platform revenue has surged 60-fold in a single year.

Z.ai's core strategy is to open-source cutting-edge models like GLM-5.2, making them freely downloadable for anyone. This means forgoing direct revenue from selling the models themselves, in exchange for driving widespread adoption that generates demand for cloud services, technical support, and on-premises deployments.

However, there are a few points of caution:

• The company is still operating at a loss, and losses are growing alongside revenue.
• A significant share of revenue comes from state-owned enterprises, blurring the line between commercial demand and state backing.
• The company's valuation is extremely high, at around $112 billion, reflecting future growth expectations.
• Securing profitability remains a challenge going forward, given the intense price competition among low-cost Chinese models in the market.