The Rabbit R1 launched at CES in 2024 to a lot fanfare — promising an AI-powered machine that you could possibly carry round with you to assist get stuff performed, whether or not it’s getting solutions to questions and figuring out objects or doing instantaneous translations or serving to you store or ebook journey.
Nonetheless, the wave of damaging critiques has apparently left the corporate in such a monetary state that it’s been unable to pay each workers and contractors for months.
Following an interview that Tom’s Guide conducted with Rabbit CEO Jesse Lyu, in which he said the company was planning to launch next-gen AI hardware in 2026, we acquired a lot of ideas alleging that Rabbit has didn’t pay since late summer time.
After investigating additional, corroborating with different sources and verifying with proof, Tom’s Information can verify that is the case, and {that a} small variety of firm workers have been on strike for the reason that starting of October.
The timeline
On October 29 after publishing an interview with Rabbit CEO Jesse Lyu about RabbitOS 2.0 and what’s next for AI hardware, I received an anonymous email with some eye-opening accusations about Rabbit Inc. that suggest the situation at the company is far more problematic than the picture painted by the CEO.
Here’s what we’ve been told:
- Rabbit Inc. has been delayed in paying contractors and employees since the beginning of this year. Payroll, since January 2025, has been at least eight days late on being paid out each month. In one instance, payment was 37 days late.
- Payments effectively ceased in July. For the last three months, several employees and contractors haven’t been paid at all. Conversations were ongoing, any threats by employees to go to the press with this were met with strong pleas not to do so, and requests to be paid were responded to as conditional on additional investment coming into the company “at the end of October.”
- Three employees have been on strike since the beginning of October. In response to not being paid since July 2025, a strike is currently ongoing — still happening to this day because these employees still haven’t been paid.
These accusations have been corroborated by several current and former Rabbit employees who wish to remain anonymous, and verified by evidence I’ve seen.
Rabbit’s official response
According to Lyu, the company had planned to generate additional revenue by selling the Rabbit device in India; he noted that the smartphone and headphone company Nothing has sent 70% of its inventory to India, suggesting that the market is potentially lucrative. However, Rabbit had to go into “cash conservative mode” once those plans were derailed.
“We were about to ship in India, because it’s undoubtedly one of the biggest markets,” Lyu told me after we reached out for comment for this story. “We had R1 units ready in May last year. Then all of a sudden, there’s some regulation complications that we couldn’t do, which threw our financial projections off quite tremendously.”
However, Rabbit could be out of its financial fix soon. “I’ve been working really hard to get the round this year, and we’ve signed a legally binding term for our next round,” Lyu said “We’ll get everyone paid for sure, and we’ll follow legal and regulations regarding the exact date.”
A representative from Rabbit added that the company expects “funding to close in the coming weeks,” but cannot disclose the name of the investor. He also clarified that the strike is three employees out of a total of 26, and that the company has “totally respected that decision.”
The business of AI hardware
Silicon Valley startups are often a gamble, and AI hardware companies in particular have been going through some rough times of late. The biggest example is the Humane AI Pin, which was sold off in assets to HP in February.
Aside from behemoths like Meta, which have the sources (and deep pockets) to develop AI-powered {hardware} just like the Meta Ray-Ban Display, startups like Rabbit need to depend on third-party corporations to design a product so that you can launch over time. In Rabbit’s case, this can be a collaboration with Teenage Engineering, and sources inform me that sequel ideas to the Rabbit R1 have been proven in 2024.
No matter whether or not you go the costlier route and design/produce the product by yourself, or pay another person, each methods require a big sum of money upfront.
To this point, Rabbit has gone by way of 5 funding rounds since November 2021. In October 2023, Rabbit raised $20 million in funding led by Khosla Ventures, in addition to an additional $10 million in December of that year. Since then, the corporate has not made any official bulletins of further funding. However Lyu has informed us this week that he’s finalizing a brand new spherical, however wouldn’t say for the way a lot, or from whom it was coming.
But does anybody care?
Not about people not getting paid, because of course you do. However, there’s a more systemic AI hardware problem here, beyond all the numbers and what sources have told me. Simply put (in my opinion), there’s a significant rift between the hype machine of AI hardware and people who actually want to use it.
I mean look around, OpenAI is entering the game with Jony Ive and that does legitimize issues just a little. However at any time when I’ve proven my pals the R1 and RabbitOS 2, the Friend pendant and even what appears to have change into the default AI wearable within the Ray-Ban Meta good glasses, the query is at all times the identical: “why is that this even a factor when I’ve a telephone?”
To many individuals, AI {hardware} feels unnecessary, when the units you have already got can do just about all of the AI-infused duties you’d need to do by way of apps and software program.
“I agree that you just should not carry two units. Nobody desires to hold two units. In truth, we weren’t anticipating you to hold your R1 with you, though we permit a sim card to make it cell — though loads of our followers take them all over the place,” Lyu mentioned in my first interview with him.
The gross sales match that sentiment too, as Meta’s Reality Labs (the team behind the smart glasses) posted a whopping $4.4 billion loss last quarter. And whereas I’m at all times in favor of corporations bringing new concepts to the desk (which means extra cool/bizarre tech for me to check and also you to purchase), it simply feels just like the folks bought caught up within the pleasure of the second and moved on by voting with their wallets.
A second chance at a first impression?
Going back to my initial interview transcript with Jesse Lyu, there are a couple of comments that just hit differently now. Firstly, I put my case to him of AI possibly being a bubble and requested whether or not he noticed issues the identical or disagreed.
“I disagree that there is an AI bubble,” he mentioned. “There may be AI overhype for certain. On the keynotes, we informed folks, ‘Hey, there’s 4 issues you are able to do with this agent.’ And other people instantly seize the R1 and say, ‘order a 12 pack of Coke on Amazon,’ and it would not work. Individuals blame that on us. Nicely, now we will do this. However there may be actually over-hyping round this business.”
The rationale why this one leapt out to me is the overwhelming uphill problem that has confronted Rabbit over the previous yr. The corporate landed with big fanfare at CES (I even gave the R1 “best of show” at CES 2024), however in the end, what we felt we bought was half-baked.
It’s been a battle for redeeming shopper confidence ever since, however loads of publications moved on in a short time after being burned by the OG R1. That’s the place this drive to repeatedly replace the software program has come from and repair (nearly) all the issues.
Can the corporate thrive once more? Given the proof we’ve seen and the present panorama of AI {hardware}, one of many final issues Jesse mentioned to me is much more pertinent.
“We first wanna be sure we will survive,” Lyu commented in response to me asking concerning the firm’s future plans. “That’s what we have been specializing in proper now.” Until the corporate can begin paying employees for his or her efforts, that future appears unsure.
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