Annualized Revenue vs ARR: Lessons From OpenAI’s $70B and $50B Figures

OpenAI's revenue was reported near $70 billion on September 29 and about $50 billion on October 8. The gap came from how partner sales were counted. Here is how run rate, ARR and recognized revenue differ, and how to define yours so investors trust it.

On September 29, an Axios scoop put OpenAI’s annual recurring revenue close to $70 billion. On October 8, the Financial Times reported a lower number that OpenAI had given its investors, roughly $50 billion in annualized revenue as September closed, and Reuters, CNBC and Axios each said their own sources backed that up. The outlets put the difference down to how sales made through cloud partners were counted when investors tried to compare OpenAI with Anthropic. For a founder, the useful part is the vocabulary. Annualized revenue vs ARR vs revenue recognized under accounting rules are three separate measurements, and this gap opened up in the space between them.

Where it stands: OpenAI itself has said nothing publicly about the lower number; it declined to comment to CNN and gave Reuters no reply. Late on October 8, a Newsquawk headline relaying Bloomberg’s sources said OpenAI expects its run rate to be $70 billion or higher when 2026 ends. The newest number in the story is a run rate too.

How one company ended up with two numbers

The higher figure came first. Axios broke it, Reuters matched it with a source of its own, and CNBC did its own math the same day: a run rate near $40 billion in August plus 70% quarter-to-date growth, which CNBC said “would put OpenAI’s annual revenue run rate at around $68 billion.”

The lower figure arrived nine days later with an explanation attached. CNBC’s source said the $68 billion “included gross revenue from OpenAI’s partners.” CNN’s source said OpenAI’s own number “is based on net revenue.” The outlets disagree on who assembled the bigger figure: CNN’s source said it “did not come from OpenAI,” while Reuters wrote that the company had pointed investors to it at a separate event. They agree it was counted differently. Axios put the gap at about $20 billion, a matter of “how different AI companies account for overall sales.”

Annualized revenue vs ARR: three different measurements

Run rate (often called annualized revenue) takes a short window and stretches it to a year. Stripe’s example: a company that earns $1 million in one quarter has an annual run rate of $4 million. Reuters noted on October 8 that analysts consider the metric “sometimes misleading,” since it often involves multiplying one month of revenue by twelve.

ARR (annual recurring revenue) counts only the revenue that repeats. Andreessen Horowitz’s startup-metrics guide says ARR “should exclude one-time (non-recurring) fees and professional service fees.” Stripe draws the contrast directly: a run rate “is a speculative figure that assumes current revenue extends over a year,” while recurring revenue rests on “ongoing customer commitments.”

Recognized revenue is what your accounts show. The a16z guide puts it plainly: “How and when revenue is recognized is governed by GAAP.” It is booked as the service is delivered, not when a contract is signed or a month looks strong.

If much of your income is usage-based, one-off or services, a month multiplied by twelve is a run rate. Calling it ARR on a slide does not change what it is.

Five labels for one figure

Count the names the press gave OpenAI’s number in ten days. Axios used “annual recurring revenue” in its headline and “annualized revenue run rate” in its body. Reuters’ headline blended the two into “annualized recurring revenue.” CNBC wrote “annual revenue run rate.” On October 8, Axios called it “the $70 billion ARR figure” in the same story that defined annualized revenue as sales from a period “projected out for a year.”

Stripe flags the root of the confusion: annualized run rate and annual recurring revenue “share the same abbreviation.” Nobody in this story needed to mislead anyone for the terms to blur. They blur on their own, which is the reason to pin yours down in writing. An investor who reads “ARR” on your slide brings their own definition unless you supply one.

How the month you pick and the growth you apply move the answer

A run rate has three inputs: the base period, the basis (gross or net of partner fees) and any growth you layer on top. In the Financial Times’ account, as relayed by Yahoo Finance and StockTwits, the $70 billion figure changed two of them, the basis and the growth. Investors first tried to establish whether OpenAI’s sales had reached $40 billion in August, using a grossed-up method meant to match Anthropic’s reporting. When OpenAI later told investors revenue had grown 70%, they applied that rate to the base and arrived at $70 billion.

Even the growth figure was pinned to two different levels. TechCrunch, summarizing Bloomberg on September 29, tied a 70% jump in run-rate revenue since July to the $40 billion August level. Axios attached growth of more than 70% to a run rate of almost $70 billion. A growth rate with no stated start and end can be stacked on the wrong base without anyone noticing.

Stripe warns that for a company growing or shrinking, a run rate “might not accurately predict future revenues, because the metric is based on a snapshot in time.” The a16z guide lists the classic shortcut, multiplying one month’s all-in bookings by 12, and names the mistakes that ride along with it: counting non-recurring fees and counting signed bookings as revenue.

What to disclose alongside each metric

Metric What it measures What to disclose alongside it
Run rate One recent period scaled to a year Which month or quarter, the multiplier, whether one-off revenue is included
ARR Recurring subscription or contract revenue, annualized What counts as recurring; that setup and services fees are excluded; the as-of date
Bookings Value of signed contracts Contract length; that it is not yet revenue
Recognized revenue Revenue earned in the period under accounting rules The period, whether it is audited, and the matching run rate if you quote one
Partner or marketplace sales Sales that reach customers through someone else Whether they are counted gross or net of the partner’s cut
Growth rate Change in one metric between two dates Both dates, and which metric is growing

The partner row is where the OpenAI gap lived. If you sell through cloud marketplaces, resellers or app stores, our companion guide on gross vs net revenue for partner sales walks through the accounting test behind that choice.

Borrow the SEC’s standard for defining a metric

In 2020 the Securities and Exchange Commission issued guidance on key performance indicators and metrics in public-company filings (Release No. 33-10751). It says the agency would generally expect three things to accompany a metric: “A clear definition of the metric and how it is calculated,” the reasons the metric is useful to investors, and “how management uses the metric in managing or monitoring the performance of the business.”

Two more lines speak directly to a grossed-up run rate. The guidance asks companies to consider whether “there are estimates or assumptions underlying the metric or its calculation” that must be disclosed so the metric is not materially misleading. And when the calculation method changes, it points to disclosing “the differences in the way the metric is calculated or presented compared to prior periods” and the reasons for the change, and to considering whether to “recast prior metrics to conform to the current presentation.” It also asks for controls that “ensure consistency as well as accuracy.”

The guidance governs public companies, and OpenAI is private. But CNBC reported that OpenAI confidentially filed its prospectus with regulators in June, with executives signaling a 2027 debut, so this is the standard its metrics would face as a public company. Nothing stops a seed-stage startup from adopting the same habits, and they make the metrics part of due diligence far simpler.

A checklist for your next investor update or deck

  • Use the exact name: run rate, ARR or recognized revenue. If a slide says annualized revenue, define it on that slide.
  • State the base period and the multiplier next to every annualized figure.
  • Strip one-time, setup and services fees out of anything labeled ARR.
  • Say whether partner, reseller and marketplace sales are counted gross or net.
  • Give growth rates with both endpoints and the metric they apply to.
  • Put recognized revenue for the same period beside any run rate.
  • Keep bookings, letters of intent and verbal commitments out of revenue.
  • If you change a definition, say what changed and why, and restate earlier periods on the new basis.
  • File the written definitions in your data room and use the same ones in every update.

Axios’s own reality check on October 8 named the trade-off. Annualized revenue is common in Silicon Valley, it wrote, “But in public markets, investors will prefer actual revenue rather than financial constructs that are far more appropriate for early-stage startups.”

Frequently Asked Questions

What is the difference between ARR and run rate?

ARR (annual recurring revenue) counts only revenue that repeats under subscriptions or contracts and leaves out one-time and services fees. A run rate takes revenue from a short period, such as a month or quarter, and scales it to a year, whatever kind of revenue it is. Stripe notes the two share the same abbreviation, which is why a deck should spell out which one it means.

Is annualized revenue the same as ARR?

Not strictly. Annualized revenue usually means a run rate: recent revenue projected over a year. ARR is recurring revenue only. In coverage of OpenAI, outlets used annual recurring revenue, annualized recurring revenue and annualized revenue run rate for the same figure, which shows how easily the terms blur.

How do you calculate revenue run rate?

Multiply one month of revenue by 12 or one quarter by 4. Stripe gives the example of a company earning $1 million in a quarter, which has an annual run rate of $4 million. Disclose which period you used, because a strong or weak month moves the result.

Why was OpenAI revenue reported as $70 billion and then $50 billion?

According to Reuters, CNBC, CNN and Axios, the higher figure counted sales through cloud partners on a gross basis to match how Anthropic reports, while OpenAI’s own end-of-September figure, as shared with investors, was closer to $50 billion. The outlets describe a counting difference, not lost sales. OpenAI has not commented publicly on either number.

Should a startup put run rate or ARR in its pitch deck?

Use whichever fits your revenue, label it exactly, and define it on the slide or in a footnote: the period, what is included, and whether partner sales are gross or net. Show recognized revenue for the same period beside it so investors can check the gap.

Sources

This article is general information for founders and is not accounting, legal or investment advice. Revenue recognition depends on the facts of each contract; work through it with your accountant or auditor. Figures are as reported by the sources cited on the dates shown; several come from people who spoke to reporters on condition of anonymity.