Monologue: Annualized Revenues Are BS

Summary

Summary of "Monologue: Annualized Revenues Are BS" – Better Offline Podcast

Podcast Information:

• Title: Better Offline
• Host/Author: Cool Zone Media and iHeartPodcasts
• Episode: Monologue: Annualized Revenues Are BS
• Release Date: August 1, 2025

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Introduction

In the episode titled "Monologue: Annualized Revenues Are BS," host Ed Zron delves into the deceptive use of annualized revenue metrics by major tech companies. Zron critically examines how giants like Microsoft, OpenAI, and Anthropic manipulate financial reporting to create misleading narratives about their growth and financial health.

Understanding Annualized Revenue

Definition and Misrepresentation

Ed Zron begins by unpacking the term "annualized revenue," emphasizing its potential for misuse:

"Annualized revenue is a deliberate attempt to hide something or mislead someone." (02:15)

He clarifies that annualized revenue often represents a single month's revenue projected over a year, which can distort the true financial standing of a company. Using a simple analogy, Zron explains:

"If I sell boxes at $100 apiece and sell three in June, I have $3,600 revenue. That's $300 times 12, because that's a year. But if I only sell one box in July, that means I have twelve hundred dollars in annualized revenue... It sounds like I’ll make that much in a year." (04:50)

This example illustrates how fluctuating monthly revenues can be misleading when annualized figures are presented without context.

Critique of Microsoft’s Reporting

Azure’s Financials Masked AI Revenue

Zron critiques Microsoft's recent financial disclosures, highlighting the company's strategy to obscure AI-related revenues within its Azure cloud platform earnings:

"Microsoft broke out annual revenue from their Azure cloud platform... but also bury their AI services." (05:20)

He points out that while Azure's growth was reported at 34% from 2024, the specific AI revenue figures were intentionally omitted to present a rosier picture. Zron calculates:

"$13 billion of annualized revenue is actually not that much compared to the over $70 billion Azure made." (06:10)

This comparison underscores his argument that annualized figures can downplay significant revenues when spread across a year.

Exposing OpenAI’s Revenue Claims

Misleading Annualized Revenue Figures

Zron turns his attention to OpenAI, challenging their reported annualized revenues:

"OpenAI's recent leak of their $12 billion in annualized revenue... means $1 billion in revenue in one month." (07:05)

He further critiques the media's portrayal of these figures, suggesting that the actual yearly revenue is far less impressive when calculated correctly:

"By my calculations, OpenAI has made just over $5 billion in total revenue through the end of July 2025." (07:50)

Zron argues that such discrepancies reveal an attempt to inflate perceptions of OpenAI's financial success.

Anthropic’s Revenue Manipulations

Consistent Use of Annualized Metrics to Inflate Growth

Zron also scrutinizes Anthropic's revenue reporting practices, noting a consistent pattern of escalating annualized revenue figures:

"Anthropic leaked that they'd hit $1 billion in annualized revenue in January, $1.4 billion in February, and so on, up to $4 billion in June." (08:30)

He challenges these claims by breaking down the actual monthly revenues, revealing that the cumulative total significantly lags behind the reported annualized numbers:

"Anthropic has made no more than $1.15 billion through the end of June." (08:45)

This analysis highlights his skepticism towards Anthropic's aggressive revenue projections.

The Bigger Picture: Intentional Obfuscation and Its Implications

Strategic Financial Misrepresentation

Zron emphasizes that the manipulation of annualized revenue figures is not an isolated tactic but a widespread strategy among tech companies to attract investments and present a facade of robust growth:

"They're selling it to people that aren't going to think about it too hard... making people believe that they'll make $12 billion or more in 2025." (09:10)

He criticizes the media for perpetuating these misleading narratives, thereby enabling companies to secure substantial funding under false pretenses.

Consequences for the Industry and Investors

Zron warns of the potential fallout from such deceptive practices, including investor mistrust and a distorted understanding of a company's true financial health:

"It's a classic swindle... 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." (09:50)

He anticipates that the unsustainable financial projections will eventually lead to disillusionment and possible market corrections.

Conclusion

Ed Zron wraps up the monologue by urging listeners to critically evaluate financial metrics like annualized revenue. He calls for greater transparency and accountability from tech companies to ensure that stakeholders are accurately informed about their financial performance:

"I'd much rather you knew what these terms mean and why they're being used." (10:10)

Zron underscores the importance of understanding the nuances behind financial reporting to avoid being misled by inflated or deceptive figures.

Notable Quotes

• On Annualized Revenue Misuse:

  "Annualized revenue is a deliberate attempt to hide something or mislead someone." — Ed Zron (02:15)

• On OpenAI’s Financial Claims:

  "OpenAI has made just over $5 billion in total revenue through the end of July 2025." — Ed Zron (07:50)

• On the Industry’s Deceptive Practices:

  "It's a classic swindle... 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." — Ed Zron (09:50)

Key Takeaways

1. Annualized Revenue Can Be Misleading: Presenting monthly revenue figures multiplied by twelve can distort the actual financial health of a company.
2. Tech Giants Are Potential Culprits: Companies like Microsoft, OpenAI, and Anthropic may use annualized revenue to create a false impression of rapid growth.
3. Media Complicity: The media often fails to critically analyze or question the use of such financial metrics, inadvertently supporting the misleading narratives.
4. Investor Vigilance Needed: Investors and stakeholders should demand greater transparency and understand the underlying details of financial reports to make informed decisions.
5. Future Implications: Continued misuse of financial metrics could lead to significant repercussions for the tech industry, including loss of trust and market instability.

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This episode serves as a crucial reminder to listeners to approach financial figures with a critical eye, especially in an era where data manipulation can significantly influence perceptions and decisions in the tech industry.

Transcript

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[Ed Zron]

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[Zone Media]

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[Ed Zron]

Hello and welcome to this week's Better Offline Monologue. I'm your host, Ed Zron. Better off and I've heard so many nice things from all of you about last week's Haters Guide to AI. And we 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 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. I should also be clear that annualized revenue is a one month snapshot. If I sell boxes at $100 apiece and sell three in June, I have $3,600 revenue. That's $300 times 12, because that's a year. But if I only sell at 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 $3,600 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 $1,200 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. Nowhere has this been more obvious than in OpenAI's recent leak of their $12 billion in annualized revenue, which the information who I genuinely like and appreciate reported as somehow indicative of OpenAI being on track to make their $12.7 billion in revenue for 2025. Here's the thing. $12 billion in annualized revenue means $1 billion 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 $8 billion 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 up $10 billion in annualized revenue, meaning $833 million. And back in December 2024, they were at $5.5 billion in annualized revenue. And that's the thing. And by the way, 5.5 works out to about $458 million in the month, but that doesn't mean that they're going to hit $12.7 billion. In fact, best case scenario, this means that OpenAI has, by my calculations, made just over $5 billion in total revenue through the end of July 2025. 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 $12 billion or more in 2025. They're projected to do $12.7 billion, which would be a remarkable number halfway towards reaching, despite what some people might be reporting 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 $1 billion in annualized revenue, and then they had $1.4 billion in February, and then $2 billion annualized in March, and then $3 billion annualized in May, and then $4 billion annualized in June. One might believe this means that anthropic will make $4 billion this year. But the actual numbers work out to the company making no more than $1.15 billion through the end of June. And if you want to check my maths, you can. Billion dollars of ARR would be 83 billion. 1.41162 billion would be 166. 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 with the person that emails me is like, what are the numbers anyway? These are obfuscations. These are intentional. Anthropic has made no more than $1.15 billion through the end of June. That is not going to get them to $4 billion without something ridiculous. Yeah, I saw a Bloomberg reporter. Love you, Ed. But saying Maybe they'll hit $9 billion 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 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 this year. That's not it. They're not even to the lofty goals they have. They're not even halfway there. Anthropics are 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 this year, and that's after revenue. And Anthropic, I think they're three to five 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 from the bone saw capital of the world. And the media is helping by obfuscating their actual revenue. OpenAI is doing the same thing. The Information reported they're at $7.5 billion of the remaining, well, 30 billion that they actually have to raise with Softbank covering the letters. 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 going to 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 going to think about it too hard. So those people don't think about it much more than thinking, oh, open AI is going to make so much bloody money. Oh, Anthropic is going to 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 going to be people that say, well, the revenue is going up. That means things are going well. In a situation where things are going well, these companies would talk about the real revenues. They wouldn't be playing weird card games and weird shuffling, shuffling those. I'm 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. 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 arrs. They wish they were. And indeed, I think in the next six to 12 months, we're going to see this sour somewhat. I look forward to telling you, regardless what happens, what's actually happening.

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