In [22]: # openai_anthropic.ipynb
Abstract
OpenAI and Anthropic are the two largest frontier AI labs by revenue and employee count, and the two highest-profile destinations for senior ML engineer compensation in 2026. OpenAI uses a Profit Participation Unit (PPU) structure that entitles holders to a share of company profit distributions, subject to a per-unit cap. Anthropic uses capped pre-IPO option grants with mechanics designed to balance employee upside against the company's mission-control governance. Senior L5 total compensation at OpenAI is approximately $700,000 to $1,100,000; at Anthropic approximately $650,000 to $1,000,000 [1].
1 Bands triangulated from Levels.fyi OpenAI, Levels.fyi Anthropic, and public reporting in The Information and Bloomberg. PPU and option terms vary by cohort and offer; candidates should request explicit terms.
table oa-1 : total comp
| Level | OpenAI TC | Anthropic TC | Note |
|---|---|---|---|
| L4 / Mid-senior | $520k - $750k | $480k - $700k | Both use non-standard titling; entry-to-mid track |
| L5 / Senior | $700k - $1.1M | $650k - $1.0M | Equity-driven; refresh cadence active |
| L6 / Staff | $1.0M - $1.6M | $950k - $1.5M | Slot-limited; named role variation |
| L7 / Principal | $1.5M - $2.5M+ | $1.4M - $2.3M+ | Very small population at this band |
Figure oa-1. OpenAI vs Anthropic total compensation by L-equivalent level, May 2026. Both labs use non-standard internal titling; mapping to the L4-L7 ladder is approximate.
section oa-2 : the profit participation unit
OpenAI's compensation structure is unusual among frontier AI labs because the company operates under a capped-profit corporate structure (a for-profit operating subsidiary with a profit cap governed by a non-profit parent). Employee equity-equivalent compensation is delivered as PPUs (Profit Participation Units), which entitle the holder to a share of OpenAI's profit distributions subject to a stated cap per unit.
A typical PPU grant for a senior ML engineer at OpenAI in 2026 might be 4-year vested with a per-unit cap of approximately 10x to 20x initial grant value (the exact multiple is non-public and may vary by cohort). The PPU pays out when OpenAI makes a profit distribution to capital holders; the timing and size of distributions is at OpenAI's discretion subject to its corporate governance structure. To date, OpenAI has not made large public profit distributions, so most PPU value remains paper.
The key implication for candidates: PPU value depends on OpenAI's long-run profit distribution policy, which is not contractually guaranteed. If OpenAI restructures (which it has signalled repeatedly since 2024), the PPU structure may convert to a more conventional equity instrument; the conversion mechanics would determine realised value. Recruiter discussions in 2024 to 2026 have included scenarios for PPU conversion to common stock, generally in ways favourable to PPU holders, but the legal mechanics are still being negotiated.
Tax treatment: PPUs are taxed as ordinary income at distribution. Unlike RSUs, there is no taxable event at vesting itself (because the PPU is not equity in legal form). For an ML engineer in California with a $500,000 PPU distribution year, the marginal federal-plus-state tax rate is approximately 50 percent, leaving $250,000 take-home. Tax planning around large PPU distribution years matters more than for standard RSU vesting because the distribution timing is partially within the company's control.
section oa-3 : option mechanics
Anthropic uses pre-IPO option grants with capped value mechanics. The cap structure is designed to balance employee upside against the company's long-term mission-control governance (Anthropic's stated long-term governance model emphasises continued employee and founder alignment with its safety-focused mission). The detailed cap mechanics are non-public, but in functional terms, options vest over 4 years with conventional cliffs.
The cap structure means that even if Anthropic's eventual public-market valuation grows substantially, the realisable value per option is bounded above. For most ML engineers, the cap is set at levels that still allow meaningful upside (the cap binds in extreme high-valuation scenarios), but the headline maximum realisable value is lower than an uncapped pre-IPO option at a peer lab. The cap structure also affects how Anthropic equity should be valued relative to OpenAI PPU or to standard pre-IPO options at smaller frontier labs.
Vesting and exercise mechanics are conventional. Options typically have a 10-year expiration from grant date and require exercise before that date or before separation from the company. Anthropic has run periodic tender offers (most recently in 2024 to 2025) that allow employees to sell a portion of vested equity at secondary-market valuations; this provides intermittent liquidity without requiring full company exit. Tender-offer participation is at the company's and outside investors' discretion and is not guaranteed.
Tax treatment: Anthropic options are typically NSOs (non-qualified stock options), which means exercise triggers ordinary income tax on the spread between strike price and current fair-market value. For options exercised at high spread, the tax bill at exercise can be substantial and is owed in cash even though no actual cash has changed hands. Exercise timing matters; many Anthropic employees exercise vested options at tender-offer events to align tax with cash availability.
section oa-4 : common questions
What is the average salary at OpenAI for ML engineers?
Senior (L5-equivalent) ML engineer total compensation at OpenAI in 2026 is approximately $700,000 to $1,100,000, comprising base salary $280,000 to $400,000 and PPU (Profit Participation Unit) grants whose annualised paper value is $400,000 to $700,000. The compensation structure is distinct from standard option or RSU grants because PPUs entitle the holder to a share of OpenAI's profit distributions (subject to a per-unit cap), rather than a percentage of equity ownership.
What is the average salary at Anthropic for ML engineers?
Senior (L5-equivalent) ML engineer total compensation at Anthropic in 2026 is approximately $650,000 to $1,000,000, comprising base salary $260,000 to $380,000 and pre-IPO equity option grants whose annualised paper value is $390,000 to $620,000. Anthropic uses a capped-option structure designed to balance employee upside against the company's long-term mission-control governance. The cap mechanics are not fully public; candidates should ask for the specific cap structure on any offer.
How does OpenAI PPU actually work?
An OpenAI Profit Participation Unit (PPU) is a contractual right to a share of OpenAI's profit distributions, capped at a stated maximum return per unit (the cap structure is designed to align with OpenAI's capped-profit corporate structure). Vesting is typically 4 years on a standard schedule. The PPU is taxed as ordinary income at distribution, not as capital gain. The realised value depends on OpenAI's profit distribution policy: if the company distributes profits, the PPU is valuable; if it reinvests, the PPU sits at paper value until distribution. There is no secondary-market liquidity for unvested or unrealised PPUs.
Are Anthropic options exercisable like standard ISOs?
Anthropic options are pre-IPO instruments with vesting and exercise rules similar to standard private-company options, but with specific cap-structure modifications that affect the maximum realisable value. The detailed terms are negotiated per offer and per cohort. Candidates evaluating Anthropic offers should ask explicitly: what is the strike price, what is the vesting schedule and cliff, what is the cap structure, what is the recent history of tender offers or liquidity events. For tax purposes, options are typically NSOs (non-qualified stock options) at this scale of private company.
Which pays more, OpenAI or Anthropic, for senior ML engineers?
OpenAI typically pays approximately 5 to 10 percent higher headline total compensation at L5 and L6 levels, reflecting its larger revenue base and longer history of established PPU distribution. Anthropic's compensation is competitive but slightly below in median terms. The choice between the two for most senior ML engineers is rarely driven by the 5 to 10 percent comp difference; it is driven by research focus, team fit, organisational culture, and the candidate's view of which lab's strategy is more likely to succeed long-term. Both are competitive top-of-market offers.
How risky is OpenAI or Anthropic equity compared to public-company RSUs?
Substantially riskier. Both companies are pre-IPO with illiquid equity instruments. Realisation depends on either tender-offer participation (which both companies have run periodically), an eventual IPO, or an acquisition. The downside risk is the company failing to monetise foundation-model capability at scale sufficient to support current valuations. OpenAI and Anthropic both have substantial revenue and broad commercial deployments, which reduces this risk relative to earlier-stage frontier labs, but the equity remains illiquid and contingent until a defined liquidity event.
How do offers from xAI, Mistral, and Cohere compare?
xAI offers are comparable to OpenAI and Anthropic for senior ML engineers, with base salaries in similar ranges and pre-IPO equity grants tied to xAI's current private-market valuation. Mistral offers in Paris are materially lower in base salary (EUR-denominated, France labour-market norms) but with European-tax-favourable equity structures; total compensation in euro terms is competitive. Cohere offers in Toronto and SF are below US-frontier-lab averages on base salary but competitive on equity. All four labs operate in the same talent pool and compete for similar candidates; offer packages converge on rough parity in risk-adjusted total comp.