Character.ai will shut down if no buyer is found, moving from a $2.7 billion Google deal to bankruptcy

Character.ai has filed for bankruptcy and is up for sale, with the transaction expected to close in early December 2026; if no buyer steps forward, the service will be shut down. The platform and subscriptions will continue operating until the deal closes. The company attributes its decline to lawsuits related to child harm, regulatory pressure, and operational issues, including one involving a teenager's suicide. Disney is acquiring some assets for $20 million, including a perpetual, non-exclusive technology license, and former employees who joined Disney last month with former CEO Karandeep Singh Anand will assist with the transition. Google completed a $2.7 billion deal in 2024, partly to bring back co-founder Noam Shazeer; Shazeer co-authored Google's Transformer paper and was supposed to improve Google's reasoning models with co-founder Daniel De Freitas, but according to The Wall Street Journal, by 2026 he had left due to Google's compute bureaucracy and joined OpenAI.