Anthropic’s Revenue Growth Suggests OpenAI Is Overvalued
The sooner Anthropic and OpenAI go public, the better—at least then we’d have proper financial disclosure. Both companies’ habit of updating the public on their revenue growth by references to either monthly revenue or annualized revenue, which is (loosely speaking) the last month’s revenue multiplied by 12, is getting old. And it’s not exactly what investors need to know.
Take Anthropic, which revealed Monday afternoon that it was now generating annualized revenue at a $30 billion rate, more than double where it was in mid-February. More significantly, that number implies Anthropic has now passed OpenAI, which a week ago said it was bringing in $2 billion a month in revenue (implicitly $24 billion in annualized revenue). And yet Anthropic raised money in February at a $380 billion valuation, while OpenAI last month finalized a fundraising at an $852 billion value. (For another angle on Anthropic, see our Dealmaker column tonight).
OpenAI looks way overvalued, which is bad news for investors in its last round, such as Amazon and SoftBank. They appear to have overpaid!
To be sure, the OpenAI-Anthropic comparison is more complicated. The two companies don’t calculate revenue in exactly the same way, as my colleague Sri Muppidi explained in this piece a couple of weeks ago. Anthropic counts all the revenue it gets from its cloud partners’ resale of its models, deducting their share as a sales and marketing expense.
OpenAI only counts the share of revenue it keeps from sales of its models by Microsoft’s Azure, its original cloud partner, Sri said. That implies OpenAI’s revenue is lower than it would be if it reported on the same basis as Anthropic. (There’s also the possibility that OpenAI increased its annualized revenue in the past week, although that seems a little unlikely.)
And let’s not forget that the annualized revenue metric is problematic to begin with. How certain is it that one month’s revenue can be extrapolated out over the next year? As my colleague Stephanie Palazzolo wrote last week, there have been signs that Anthropic’s server capacity may be under strain from all the increased usage. If customers encounter difficulties, they might switch to a different model.
Still, the question of which company is bigger right now is a little beside the point. It’s undeniable that Anthropic’s focus on business customers has turbocharged its growth, while OpenAI’s chaotic management seems to be holding the company back. Investors in OpenAI’s last round may indeed have overpaid, but there’s still time for the company to turn things around. Right now, though, Anthropic has the wind at its back.