Character.ai files bankruptcy, Disney to pay $20 million for assets

Character.ai's bankruptcy filing caps a period of legal, regulatory, and operational headwinds. The company's technology was expensive to run and struggled with profitability, even though at its peak subscription revenue reached $2.8 million per month and total revenue including ads hit $5.3 million per month. Those gains were swamped by AI computing costs: $13.8 million per month in 2024, $10 million per month in 2025, and $56.1 million from January through August 2026 alone.

The proposed sale to a Walt Disney affiliate would hand Disney a non-exclusive license to unspecified intellectual property and a set of undisclosed assets for $20 million, plus transition support. Disney hired former Character.ai CEO Karandeep Anand as its CTO in mid-September 2026, a move seen as part of Disney's broader push into AI. Character.ai's leadership says it explored all available options and concluded that a court-supervised sale process offers the best chance to maximize value for stakeholders.

The timeline for completion is late November to early December 2026, with the service planned to continue with minimal disruption until then. Paid features may change, and users would be notified in advance of any such changes. If no suitable buyer comes forward, the platform could still close.