Volatility in US stocks followed the revelation that OpenAI’s annualised revenue was about $20bn less than previously reported. The Financial Times confirmed the figure at close to $50bn, down from earlier estimates of $70bn. The discrepancy has highlighted the reliance of markets on annualised revenue, a vague metric used by AI start-ups to express growth to investors.
The focus on this metric has renewed calls for OpenAI and Anthropic to become public companies or formalise their financial reporting. Both companies are in fierce competition to develop better AI models, and their revenue projections have become a closely watched barometer for investors and the public attempting to gauge the strength of the AI boom. Shares in companies linked to AI, including Oracle and Nvidia, declined sharply after the FT’s report.
The AI sell-off pushed the tech-focused Nasdaq 100 down 1.4 per cent on Thursday, with the index partially recovering on Friday. Annualised figures are partial, extrapolating recent performance and expectations about the sustainability of customer contracts. Adding to the confusion is the fact that OpenAI and Anthropic use different accounting methodologies to calculate their annualised revenue.
Anthropic recognises gross revenue on sales through cloud partners, while OpenAI counts only its own cut of proceeds from arrangements with partners such as Microsoft. The $70bn figure reported in September arose from attempts by investors to compare Anthropic and OpenAI performance on a like-for-like basis. However, OpenAI described the $70bn as a “net” revenue metric when it was approached by the FT at that time.
OpenAI has always used the net figure in its internal accounting, and even on a gross basis the $70bn estimate would be inaccurate. In a statement, OpenAI said: “Last week, we shared remarkable 70 per cent growth in annualised run rate revenue in Q3. Subsequent reports that we had reached $70bn run rate were not accurate.
We can confirm our current run rate is approximately $50bn.” Wall Street’s sensitivity to the revenue figures underscores how important OpenAI and Anthropic are to the broader AI boom, which has sent US stocks to record highs and helped fuel economic growth. Annualised figures provide private market investors with a sense of a start-up’s momentum — typically more important to venture capitalists than profitability. But OpenAI and Anthropic have reached an unprecedented scale and significance for such young, unlisted companies that they both face calls to go public or provide more transparency.
Source: Financial Times Companies · Summarized by HeadlinesBriefing