Wall Street Gears Up for Earnings

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This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead. With insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast, with Carol Massar and Tim Stenovec.

Carol Massar (0:32)

We want to get to our ongoing AI watch and the big players moving ever closer to their IPOs. OpenAI is expecting to reach or exceed $70 billion in annualized revenue by the end of the year. According to people familiar with the matter, driven largely by its growth and its enterprise business. I think what's so interesting about this, Jess, so that's today's story.

And just yesterday, we heard OpenAI is on track to generate annualized revenue of roughly $50 billion, according to people familiar with the matter. It's an uptick from the prior year, but less than some recently reported estimates for the Chatcheap BT maker. I think what is fascinating is we continue to get closer and closer to the IPO of OpenAI and Thropic. We're getting more details into the businesses that they are. But I'm just wondering if the expectations or the reality is going, will the reality match up with the expectations?

Jason Kelly (1:29)

Bloomberg had that story just last month talking about how OpenAI is considering slowing down the development of that cutting edge AI and Chatcheap BT maker's CEO. Obviously, the same ultimate, hoping that other AI companies will do the same. What does that mean? To your point, Anthropic potentially mid-November, Bailey Lipschult's reporting on that from our Bloomberg News. Maybe that could come, but it's been delayed.

Carol Massar (1:51)

Right. Exactly. Let's see. It's not our responsibility to keep track of all of this. It is Seth Fiegerman's. He's AI editor of Bloomberg News. He's here in our studio.

It is a lot. I feel like I've talked about AI more this week than I have in a long time. Like we spent hours just devoted entire broadcast.

Seth Fiegerman (2:10)

Condolences. Sorry for you too.

Carol Massar (2:13)

Open AI, what's the reality? I just feel like we keep getting some mixed stories about, I mean, still generating a lot, it seems, but what are we finding out?

Seth Fiegerman (2:22)

Yeah, I mean, certainly from our reporting, this is still a company that's growing like a pretty healthy clip. If anything, I think the story of this week is more about the confusion around this metric and if you step back from it, this is not your standard revenue accounting metric that you'd see on an earnings report. This has become an increasingly common metric that we see in the AI startup industry, annualized revenue, projecting what they think the revenue will be for the full year based on a week, a month, a quarter, everyone's a little bit different. For Open AI Anthropic, they also have differences in how they account for the sales that are through their third party partners. It's unclear whether you're measuring apples to apples here. I think a lot of investors are just confused. Unfortunately, this number, these figures are among the only real visibility that we get.

Given how important and central Open AI Anthropic are to the wider trillion dollar AI boom, any perception that it's weaker or not what it's expected has these broader ripple effects that we saw yesterday.

Carol Massar (3:18)

So is it weaker though?

Seth Fiegerman (3:22)

That's certainly not the indication that we've had so far.

Who knows? But it feels more a question of calculation. We have reported, I think in July, that it was 40 billion, now that it's 50, trending towards 70 at the end of the year. It feels like a lot of the discrepancy happened with admittedly other news outlets that may have calculated it differently.

Carol Massar (3:43)

What's the valuation we're expecting?

Seth Fiegerman (3:45)

For the IPO.

So right now, the company is in funding talks. There's another 30 billion dollar round that we've reported could value at 1.4 trillion. Anthropic, which was most recently valued at 965 billion on the private market, could go public at a $2 trillion valuation, so it's a lot.

Carol Massar (4:02)

So yeah, what's the PE on that, kiddo? And is there earnings?

Seth Fiegerman (4:06)

Well, Anthropic has said that it has an operating profit, or at least we've reported that it has an operating profit. I think, unlikely for opening eye at this point.

Jason Kelly (4:14)

So what about Firmus? Because that was supposed to be this really popular, related to Australia coming out with that, with the data sitters. And then this, I mean, the news that we had coming out about that, obviously not helpful for that outlook for them. And it was supposed to be this like data center darling, but now it's not. So when you're seeing pockets like that, and then you have some of these delayed IPOs, what is this telling us about the direction of where this going when there's so much excitement about this, but now we're seeing delays?