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OpenAI recently topped $1.6 billion in annualized revenue on strong growth from its ChatGPT product, up from $1.3 billion as of mid-October, according to two people with knowledge of the figure.

The 20% growth over two months represented in that figure—a measure of the prior month’s revenue multiplied by 12—suggests that the company was able to hold onto its business momentum in selling artificial intelligence to enterprises despite a leadership crisis in November that provided an opening for rivals to go after its customers.

• Quarterly revenue pace passes $400 million

• Some managers think the annualized rate could hit $5 billion in 2024

• OpenAI has a lower valuation multiple compared to Anthropic

The latest annualized revenue figure implies that OpenAI is generating at least $130 million per month from the sale of subscriptions to ChatGPT and from letting software developers access its models through an application programming interface.

OpenAI also takes a cut of revenue from Microsoft’s sale of OpenAI models to Microsoft cloud customers as a result of a close partnership between the companies. Under that agreement, Microsoft is the only company that can resell OpenAI’s technology, and the enterprise software giant has wooed some customers that previously bought the technology directly from OpenAI. That has deprived OpenAI of some revenue because the startup keeps a much higher proportion of the sales it closes on its own.

An OpenAI spokesperson did not immediately have a comment.

OpenAI’s business progress underscores its lead over independent rivals such as Anthropic, a three-year-old firm whose leaders previously worked at OpenAI. Now financially backed by Google and Amazon, Anthropic has projected it will generate more than $850 million in annualized revenue by the end of 2024, The Information reported this week. By comparison, some OpenAI leaders believe their company can reach an annualized revenue rate of $5 billion by the end of 2024, while others believe it can reach a far higher figure, according to two people familiar with the projections.

The financial losses sustained by those two prominent AI startups couldn’t be learned, but they have been substantial in the recent past.

High Revenue Multiples

Bloomberg reported earlier this month that OpenAI is raising new funding at a $100 billion valuation. That valuation would represent a multiple of around 62 times the startup’s forward revenue, which is steep compared to the multiples of many public enterprise software companies but in keeping with those of other fast-growing AI startups. If Anthropic is currently generating revenue at a pace of around $17 million per month, as it previously told investors it planned to, investors in that startup’s ongoing funding round are paying around 75 times forward revenue.

The new valuation for OpenAI would represent a jump from the firm’s implied valuation in an ongoing employee share sale, known as a tender offer. Investors led by Thrive Capital are paying for shares at a price that implies an $86 billion valuation for the company. OpenAI has been trying to lure talent from archrival Google by telling AI researchers there that they can lock in their compensation packages—worth as much as $10 million annually—before the tender offer sets a higher price for the stock. Shares of OpenAI are doled out in the form of profit units, which promise a slice of the company’s future profits.

The revenue should help OpenAI as it seeks to raise more money to support the costs of computing, which CEO Sam Altman has described as “eye-watering” for startups like his. He has previously said that OpenAI may need to raise $100 billion in capital to achieve its goal of creating AI that can reason the way humans do and handle an array of jobs people currently perform.

Wall Street firms and big banks have been among the most enthusiastic buyers of generative AI, which can help their software engineers automatically generate software code and their investment managers make better decisions. Other companies use the technology to create marketing materials and automate customer service interactions.

Microsoft has told investors it is on pace to generate $10 billion from new AI services, including those powered by OpenAI. Microsoft sells OpenAI-powered features in its business software, such as those that help customers generate summaries of long documents or videoconference recordings. Other features create PowerPoint presentations and other text or imagery based on simple descriptions of what customers want to see.

Profit Sharing

OpenAI’s technology is powered by Microsoft data centers, and Microsoft takes a cut of the revenue OpenAI generates. Microsoft also is in line to get a substantial share of the startup’s profits if and when they materialize, thanks to a $10 billion commitment Microsoft made to fund OpenAI at the start of the year. That hasn’t stopped other marquee startup investors, including Thrive, from buying shares of OpenAI—even after the recent firing and reinstatement of Altman in November, an event that brought the company to the brink of collapse.

The Altman episode prompted some companies that relied on OpenAI models for their products to consider using multiple providers. The nonprofit OpenAI board of directors, which oversees a for-profit unit led by Altman, is currently in the process of filling six of the nine board seats that remain empty. It also has hired a law firm to look at Altman’s conduct leading up to the drama.

While OpenAI and Microsoft have shown that conversational AI, enabled by large language models, can be a big business, it isn’t clear how much these models can improve relative to their capabilities today, and how much capital they will require to do so. OpenAI engineers have recently been excited about a breakthrough that enabled one of its models to solve math problems it hadn’t seen before.

But OpenAI isn’t the only game in town, and early customers say they are looking for cheaper options. Other cash-rich firms such as Google and Amazon are launching competing AI, including multimodal software that can recognize and analyze objects and charts. OpenAI and many of those rivals are already looking to use that kind of software to develop powerful AI voice assistants for personal devices.