Why OpenAI's annualized revenue is $20B lower than previously reported
What's the story
OpenAI's annualized revenue has been revised to $50 billion, a figure that is about $20 billion lower than previously reported. The discrepancy comes from the different accounting methods used by AI companies for their total sales. The earlier reported figure of $70 billion was based on information shared with investors to directly compare with rival Anthropic, according to Financial Times.
Accounting differences
GAAP compliance and revenue recording methods
Both OpenAI and Anthropic are GAAP compliant, but they have different approaches to recording revenue from partner sales.
For instance, if a customer pays $100 for an AI service through a cloud provider, Anthropic's method allows it to record the entire amount as top-line revenue.
On the other hand, OpenAI only records its share of certain partner sales.
This difference stems from how each company views its role in transactions and who controls customer relationships.
Revenue projections
Investors miscalculated OpenAI's annualized revenue again
The $70 billion figure for OpenAI was an attempt to "gross up" its revenue number based on investor interest in having a direct comparison with Anthropic's methodology.
This is not the first time investors have miscalculated OpenAI's annualized revenue.
In August, they estimated sales at about $40 billion and then added a reported 70% growth figure to that estimate, leading them to believe the company's annualized revenue was around $70 billion.
Market position
Revenue gap puts OpenAI behind its rival
The revised revenue figure of $50 billion puts OpenAI behind Anthropic, which is estimated to have around $65 billion in annualized sales.
This is especially significant, as both companies are major competitors in the AI space and are vying for enterprise customers.
They are also building AI agents for businesses, a step away from traditional chatbots that only answer questions.
Market anticipation
Implications for potential IPOs of both AI firms
The revenue gap comes at a critical juncture for OpenAI, which is expected to go public in early 2027.
Anthropic may also follow suit, with rumors suggesting a Thanksgiving IPO and an S-1 investor prospectus filing soon.
The differing revenue estimates are important, as investors closely monitor both companies ahead of potential stock-market listings.
Revenue growth will be a key metric in valuing AI firms.