Monologue: Annualized Revenues Are BS

In this week’s monologue, Ed Zitron walks you through how and why OpenAI and Anthropic use “annualized revenues” to hide that they’re nowhere near their yearly revenue projections. https://www.theinformation.com/articles/anthropic-revenue-hits-4-billion-annual-pace-competition-cursor-intensifies?rc=kz8jh3 https://www.theinformation.com/articles/anthropic-revenue-hits-4-billion-annual-pace-competition-cursor-intensifies?rc=kz8jh3 www.theinformation.com/articles/openai-hits-12-billion-annualized-revenue-breaks-700-million-chatgpt-weekly-active-users?rc=kz8jh3 https://www.theinformation.com/articles/openai-hits-12-billion-annualized-revenue-breaks-700-million-chatgpt-weekly-active-users?rc=kz8jh3 Episode note: I say “$5.5 billion” for OpenAI’s potential revenue in 2025. Calculations I’ve run since suggest it could be lower - around $5.25 billion. Both of these numbers are reasonable. YOU CAN NOW BUY BETTER OFFLINE MERCH! Go to https://cottonbureau.com/people/better-offline and use code FREE99 for free shipping on orders of $99 or more. --- LINKS: https://www.tinyurl.com/betterofflinelinks Newsletter: https://www.wheresyoured.at/ Reddit: https://www.reddit.com/r/BetterOffline/ Discord: chat.wheresyoured.at https://discord.com/invite/QUUQUP9szv Ed's Socials: https://twitter.com/edzitron https://www.instagram.com/edzitron See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  This is an iHeart Podcast. Guaranteed Human. Empower is all about helping you invest well so you can go out and live a little. And their Free Empower Personal Dashboard shows you your full financial life in one place. You'll be able to see your net worth, monitor budgets, analyze your portfolio, set retirement goals and more. Whether you're saving for something big, want to treat yourself, friends or family, or meet long-term goals, Empower helps you see where you stand. You've worked hard for your money and Empower can help you make the most of it. Download the Empower Personal Dashboard or visit empower.com. Not an Empower client paid or sponsored.

• 0:41Ed Zitron?

  Hello and welcome to this week's Better Offline Monologue. I'm your host, Ed Zitron.

• 0:52Ed Zitron?

  And I've heard so many nice things from all of you about last week's haters' guide to AI and I really couldn't be more grateful. It was a labor of love and hate in some cases, I guess. As we approach what I see as the precipice of this hysterical era, we're going to start seeing and hearing big tech and big model developers make intentionally vague statements with the intent of misleading you and the media. And I really want to be clear, I'm sorry there's going to be some maths in this, but it's necessary for you to know how people are trying to swindle you and the media too. So, Microsoft kicked this off this week with this week's earnings, breaking out annual revenue from their Azure Cloud platform, where they sell the means for people to run applications and organizations in the cloud, but also bury their AI services. And they did this for the first time in history. This naturally led people to say that Azure's growth, which is up 34% from 2024, when

• 1:37Ed Zitron?

  they didn't disclose it, was driven by artificial intelligence somehow, despite the fact that Microsoft intentionally stopped reporting on their earnings, their AI revenue, in January, when they said they had 13 billion of annualized revenue, meaning about $1.08 billion a month. And god, that term annualized is a tricky one. Also, by the way, they made over $70 billion on Azure, so $13 billion of annualized revenue is actually not that much. But anyway, the term annualized is a really tricky one. When you read or hear someone say annualized revenue, it means a particular month multiplied by 12. However, what they want You to think is that annualized means that the company in question will make that much money in the year. In part because there isn't a single goddamn media outlet that seems capable of seeing through this.

• 2:19Ed Zitron?

  I should also be clear that annualized revenue is a one month snapshot. If I sell boxes at a hundred dollars apiece and sell three in June, I have thr- thirty six hundred dollars in annualized revenue. That's three hundred dollars times twelve, because that's a year. But if I uh only sell a one box in July, that means I have twelve hundred dollars in annualized revenue, which doesn't quite sound so good. My June annualized revenues of thirty six hundred dollars make it sound like I'll make that much in a year. However, if I also tell you that I only sold one box and I had twelve hundred dollars of annualized revenues based on July, you'd suddenly be more concerned and quite concerned indeed about the volatility of this box business. In simpler terms, annualized revenue is a deliberate attempt to hide something or mislead someone.

• 3:04Ed Zitron?

  Nowhere has this been more obvious than in OpenAI's recent leak of their twelve billion dollars in annualized revenue, which the information who I genuinely like and appreciate reported as somehow indicative of OpenAI being on track to make their twelve point seven billion dollars in revenue for twenty twenty five. Here's the thing. Twelve billion dollars in annualized revenue means one billion dollars in revenue in one month, which is genuinely a milestone. Kind of impressive. At least it would be if OpenAI didn't burn upwards of eight billion dollars this year, even though I think they're probably going to burn more than that. But anyway, back in May, CNBC reported that OpenAI was at ten billion dollars in annualized revenue, meaning eight hundred and thirty three million dollars. And back in December twenty twenty four, they were at five point five billion dollars in annualized revenue.

• 3:49Ed Zitron?

  And that's the thing. And by the way, five point five works out about four hundred and fifty eight million dollars in the month. But that doesn't mean that they're gonna hit twelve point seven billion dollars. In fact, best case scenario, this means that OpenAI has, by my calculations, made just over five billion dollars in total revenue through the end of July twenty twenty five. That's in the first seven months of the year. So anytime you see annualized revenue, you should immediately be suspicious of whoever is leaking it. OpenAI has likely leaked this number as a means of making people believe that they'll make twelve billion dollars or more in twenty twenty five. They're projected to do twelve point seven billion dollars, which would be a remarkable number that they're not even halfway towards reaching, despite what some people might be reporting.

• 4:31Ed Zitron?

  Now, another company playing silly buggers with this figure is, of course, Anthropic, who have leaked so far this year, every single month of, every single month other than April. It's kind of crazy. And they, but they started in January, when they leaked that they'd hit a billion dollars in annualized revenue. And then they had 1.4 billion dollars in February, and then 2 billion dollars annualized in March, and then 3 billion dollars annualized in May, and then 4 billion dollars annualized in June. One might believe this means that Anthropic will make 4 billion dollars this year, but the actual numbers work out to the company making no more than 1.15 billion dollars through the end of June. And if you want to check my maths, you can. Billion dollars of ARR would be 83 billion, 1.4, 1, 1.6,

• 5:13Ed Zitron?

  2 billion would be 1.66, then May would be 3 billion annualized, so it'd be 2, it'd be 250 million, and 4 billion ARR would be 333 million. I'm saying this for the person that emails me, he's like, um, what are the numbers? Anyway, these are obfuscations, these are intentional. Anthropic has made no more than 1.15 billion dollars through the end of June. That is not going to get them to 4 billion dollars without something ridiculous. Yet I saw a Bloomberg reporter, love you, Ed, but saying, maybe they'll hit 9 billion dollars in annualized revenue this year? That's an absolute joke. OpenAI barely hit that, and they have all the, it's just, it's all deliberate, and it's all intentional, it's all so that you kind

• 5:56Ed Zitron?

  of watch the mouth and not the hands. It's so that you don't think too hard. Because when you look at the actual numbers, OpenAI has only made like 5.5 billion dollars this year. That's not it. They're not even to the lofty goals they have, they're not even halfway there. And Anthropic's at 1.15 billion. These are not huge amounts. And they're dwarfed by the fact that each, I think OpenAI is going to burn 8 to probably 15 billion dollars this year, and that's after revenue. And Anthropic, I think they're 3 to 5 billion dollars. It's an absolute joke. But you, you the listener, I want you to know that all of this is intentional, as Anthropic is currently raising around as large as 5 billion dollars from the bone saw capital of the world, and the media is helping by obfuscating their actual revenue. OpenAI

• 6:41Ed Zitron?

  Doing the same thing, the information reported there at seven point five billion dollars of the remaining, well, thirty billion that they actually have to raise with SoftBank covering the let the rest. They're trying to hoodwink people, and I want you, the listener, to know better. Agree with me, disagree with me, I'd much rather you knew what these terms mean and why they're being used. And yes, there's gonna be someone who says annualized is a fine term, people use it ethically, and that's true. You can use this term ethically. You can use this to say, yeah, if things keep up at this pace, we'll be at this. That's not what these fuckers are doing. They're doing this as a means of they're selling it to people that aren't gonna think about it too hard.

• 7:21Ed Zitron?

  So those people don't think about it much more than thinking, oh, OpenAI is gonna make so much bloody money. Oh, Anthropic's gonna do that too. And it sucks, it sucks because this is this is being used to make people richer, to make Dario Amadei and Sam Clammy Sam Altman more and more money. And it's really sad, it's sad, but it's also a sign that things are kind of deteriorating. And yes, there are gonna be people that say, well, the revenue's going up, that means things are going well.

• 7:53Ed Zitron?

  In a situation where things are going well, these companies will talk about their real revenues. They wouldn't be playing weird card games and weird shuffling shuffling the one now, as I'm saying this, forgetting what you call the game with the cup on the ball. Someone's going to email me and make fun of me for this, I'm stupid, you don't get to do that. But in all seriousness, they're doing tricksy things, and they're doing it because they're trying to raise money. It's a classic swindle, and it pisses me off to see because people are going to think this is a victory for the AI boom. When in reality, they're trying to hide something a little more grim than that, which is revenues are nowhere near their ARAs. They wish they were. And indeed, I think in the next six to twelve months, we're gonna see this sour somewhat.

• 8:37Ed Zitron?

  I look forward to telling you regardless of what happens, what's actually happening.

• 8:49Speaker 00

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