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OpenAI Doubled Revenue and is Doing More Business Than Azure – New Reports
OpenAI’s generative AI market leadership has converted to solid revenue and customer growth. Recent reporting by The Information revealed that CEO Sam Altman told company employees “OpenAI has more than doubled its annualized revenue to $3.4 billion in the past six months or so.”
With continued growth at a comparable rate, those figures suggest OpenAI will finish 2024 with over $4 billion in annual revenue. The biggest revenue driver is ChatGPT. According to the article’s sources, it represents about $3.2 billion in annualized revenue, 94% of the total. If this were the consumer edition alone, it would suggest over 13 million consumers are paying the $20 monthly ChatGPT fee. More likely, 8-10 million consumers are subscribers, and the balance is coming from businesses.
Ahead of Azure
The remaining $200 million in annualized revenue is supposedly coming from payments for access to OpenAI’s foundation models. It is unclear whether this includes revenue sharing from Microsoft’s Azure, but it is very likely it does.
Another article from The Information reports that Altman told staffers that providing model access is a $1 billion annualized revenue business. That would suggest it reflects about 29% of total revenue, while ChatGPT for consumers and enterprises is closer to 70% of total revenue.
The Information also suggests that OpenAI is not generating more revenue from selling access to its AI foundation models than Microsoft Azure because it hit the billion-dollar annualized run rate months ahead of the cloud giant.
Revenue Builds Buyer Confidence
The most important element of this news is that it will likely help OpenAI extend its lead. Technology buyers take many factors into account regarding vendor selection. Product quality and effectiveness are important, as is business viability. Many enterprise buyers are reluctant to bet on start-ups that are pre-revenue as it creates more uncertainty about their market staying power.
Granted, revenue does not mean profitability. OpenAI still has high costs and faces financial risk. It also is being compared with its AI model rivals. That includes well-financed tech giants such as Google and Meta. It also includes startups like Anthropic, which have far less revenue and proven business viability.
Anthropic’s latest AI foundation model may be better than GPT-4 based on some benchmarks. However, the company is almost certainly viewed as a bigger risk for any enterprise considering a long-term bet on an AI partner, given its smaller customer and revenue base.
Higher revenue means that OpenAI can more easily cover expenses and invest more in product development, marketing, sales, and acquisitions than rivals without having to raise as much outside capital. The Information also reported that OpenAI has a 200-person sales team today, up from 10 in 2023.
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