OpenAI’s Revenue Surge as AI Infrastructure Race Intensifies

SPEAKER_1 (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News. Bloomberg Tech is live from the heart of Silicon Valley with Ed Ludlow in San Francisco.

Ed Ludlow (0:22)

This is Bloomberg Tech. Coming up, OpenAI expects to reach or exceed $70 billion in annualized revenue by the end of the year. Plus, Oracle keeps several data centers on track by relying on truck deliveries of natural gas. And we sit down with Kleiner Perkins' partner, Ilya Fushman, to get his take on the mega IPO pipeline. And a lot more really big conversation coming up.

Well, you made it. Happy Friday. In a week that started with the NASDAQ 100 building on and posting consecutive record highs, and let's be honest, then we had a bit of a wobble in the markets. We're going to talk about why in just a second. Net net, the NASDAQ 100 is flat on the week. The pain really felt in semiconductors. What's so interesting is the declines in chip stocks. Look at the SOX, the Philadelphia Semiconductor Index.

Puts this index on track for a pretty steep weekly drop. Its first weekly decline going back to the week that ended August 28th. The picks and shovels. Again, we'll get to that, but it's all because of some confusion around the top story. And today's top story and big number, $70 billion. That's OpenAI's projected annualized revenue by the end of the year. According to sources, you say the company shared that number with investors as part of discussion for its latest fundraising efforts, Bloomberg's Rebecca Torrance, broke the story last night with Shireen Ghaffari, I think gave a lot of clarity on what's been a confusing few days. Just explain the basics of what we're reporting here.

Rebecca Torrance (1:44)

Absolutely. So it's really rattled the market that as you mentioned.

This particular story shares that OpenAI's annualized revenue, which is a projection of its sales over a longer period, is set to hit 70 billion by the end of this year. We reported earlier yesterday that right now it's at about 50 billion. When that number was reported by a bunch of outlets, there was a bit of confusion because there was a 70 billion number, $70 billion number out there previously. And the understanding had been that that is where OpenAI's annualized revenue is now. So it threw the markets for a bit of a loop to say, oh, this number is now $20 billion less than we had expected. What that's coming from is a difference in how OpenAI and Anthropic calculate their revenue, which we can talk a bit about.

Ed Ludlow (2:30)

Well, let's talk about it. I'll point out first that what is annualized revenue? A lot of people miss the basics. And that is they're not posting in calendar 26, 70 billions of dollars. OpenAI basically expects to end this year making money at a pace that if they kept going at that pace over the next 12 months, they'd make $70 billion of revenue. Audience, that's how we understand it.

But what they categorize in revenue accounts for some of the confusion. So now explain that part.

Rebecca Torrance (2:57)

Right. So Anthropic, when it's calculating its annualized revenue, and our understanding is that the most recent figure there, that's public, has been around $65 billion for them. That includes gross sales from its cloud partners. OpenAI strips that out. And so the figure that is being shared here, the 50 billion, is its net annualized revenue just from its share of the cloud revenue.

Hiba Amba (3:20)

As opposed to gross.

Rebecca Torrance (3:21)

Right, exactly. But because it's not a one-to-one apples, you know, apples to apples comparison with Anthropic, it's really hard to compare these two businesses, these direct competitors, against each other.

Ed Ludlow (3:32)

So look, there are lots of people who have sort of, maybe more limited understanding of private markets and the companies, and they're thinking like, why do we have all these financial metrics? These companies aren't even public yet, right? In our reporting, the whole point, go back a week, we broke the story on this private funding round.

And it's part of that mechanism, as I understand it, and in your reporting too, OpenAI is basically explaining to investors what's going on, as part of an effort to raise funds.

Rebecca Torrance (3:59)

That's correct. And this is happening in AI a lot, because these companies are growing so quickly, to share just the revenue as far as it's come this year, doesn't feel like quite enough. And so OpenAI, in its conversations with investors, we've reported that it's in talks to raise $30 billion at a $1.4 trillion valuation, finds it more apps to use the $50 billion number to explain, look how much we're growing, $70 billion in annualized revenue by the end of the year, we have much more on the way.