OpenAI’s Revenue Run Rate Tops $40 Billion Ahead of IPO

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1:59and tech news as it happens. The Bloomberg Business Week Daily podcast with Carol Masser and Tim Stenevek on Bloomberg Radio. Safe to say one of the most anticipated market events will eventually be, when we get them, the IPOs of Anthropic and OpenAI. On the latter, OpenAI is on track to generate annualized revenue of more than$40 billion based on its current performance. That's according to people familiar with the matter, roughly doubling its run rate from the end of 2025. That sounds like a pretty good jump, don't you think? Yeah, but you know what? There's a lot of competition out there. It's growing, right?

2:37Yeah. This market changes a lot. And they have to be very innovative too. Okay. So you caught up with Rachel Metz earlier. I did. And I said, we got to get her back. We didn't get enough time with Rachel Metz earlier. I'm glad we are doing more. Bloomberg News AI reporter Rachel Metz. She's out there in San Francisco. Rachel, it is good to have you back. We think this is our top story. As the AI trade and narrative continues, trying to understand these companies as they change, as their valuations grow, tell us about what we seem to know about OpenAI and some of these numbers that are starting to come out.

3:10Okay. So, there's a bunch going on here, right? We have. Sorry. Oh, I love it already. It's a lot. So our reporting, me and Natasha Musker-Nhas, what we have determined is that OpenAI's revenue has gone up quite a bit, especially when you compare it to the last figure that we were aware of from the end of the year, which was about$20 billion. So$40 or above$40 billion is where they're tracking at now for ARR, which is, I mean, that's a lot of growth, right? The other thing that I think is interesting here is it's not just coming from one piece of their business. our understanding is that it is sort of across a bunch of different product lines.

3:51It's important to remember consumers still make up the vast majority of their users. It is also still the biggest part of their business. So some of this is in consumer growth. And you saw recently that their user numbers pushed above a billion active weekly users. So this would be growth in consumer in part over there. Then we're also seeing on the business side with their enterprise users, that has also been growing. And some of that is with Codex. So that is their coding product that they have been pushing and pushing to rival companies such as Anthropic. Okay. And we know Codex is important and we know Cloud Code is important, but on the consumer side, I'm just going to throw Carol under the bus here for a second.

4:31I think you said this on air, but I don't know if you did. Forgive me if you didn't. But she's using these LLMs and she hits a limit on the LLM and just goes to a different one. And you know what? I do the same thing. I don't pay for any of these i'll use chat gpt i'll use claude when i run out of space on chat gpt can i just i'll use google's ai search overview like what you're right but like i was using chat gpt and it involves a lot like there's a big history at this point and i'm so that's that's the moat for you i'm generating an image and i basically they'll say come back to me in 23 hours and 20 minutes and you know what i'm paying 20 bucks a month and i'm not paying but i'm like all right we're just gonna wait 24 hours that's what i'm gonna do but you but tim's right like they're telling you it's gonna cost if you want unfettered access of those billion weekly users how many of us are paying yeah oh that is a good question i i don't know off the top of my head and i will look into that i don't know if anyone knows outside of the world of open gpt right or the open ai over us you can figure it out yeah um but i mean we do know that an increasing number of people are paying for it because that is where some of their revenue growth is coming from um and we also know that their advertising business that's also been picking up so even if you are using it not paying for it perhaps you could still be contributing to revenue growth right if you're helping you're not helping but you know what i mean like if you're part of the advertising revenue going up so we'll see we'll see and i will i will get back to you when i have more clarity on the split there.

6:07Can I just, before we wrap up, because we know we have to jump off to another story, but you've got all these stories, OpenAI and Anthropic are increasingly focusing on a new metric they say is a more accurate reflection of the real cost and value of using their AI software. You've got that story out there. You've got ZAI, Derrival, Anthropic, OpenAI encoding with a new AI model, DeepSeq, quadrupling its... There's a lot happening. I know. So, you know what it says to me, but you're the expert on this. It's just, stuff is happening fast and new companies, different companies like are doing stuff.

6:40So it is evolving and who knows, I don't know if I can use the word end game, but who ultimately, like how this all kind of lands. We don't really know yet, or do we? I don't think we do. I think it's important to understand that each individual model release is simply that these models will be released and then there will be another model that is released and the company's aim is to make each one better than the last or different than the last. So it's a spectrum. We're going to see things continue apace. It is possible there will be quite a number of so-called winners here. I mean, a lot of companies both inside the U.S.

7:15and outside the U.S. at this point, they're developing interesting technology and taking different approaches. So it's going to sort of still be like TBD, I would say. And I think that there's going to be a lot of interesting stuff continuing to happen over the next year or two, especially if and when we see some of these companies pushing toward IPOs. That's why we come to you to just set us straight. Thank you, thank you. Double duty. Tim and then Tim and me together, and then maybe you'll do me solo in an hour. I don't know. We'll just keep it going. And then we'll have more stories. Love, love, love.

7:46Have a great weekend. Rachel Metz out there in San Francisco. She's Bloomberg News AI reporter. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

7:57What if data didn't sit still? What if intelligence moved with us? Not buried in reports, but activated in real time. Where lives are being shaped. Where decisions are being made. It all starts with a question. Where is the potential? Cotality turns data into clarity. Intelligence into insight. Insight into action. Because when intelligence moves, we all move forward. Kotality. Intelligence beyond bounds.

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10:05Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. Let's get to another most read. It might even be still the most read on the Bloomberg at this hour. We're talking about how the U.S. will soon announce unprecedented economic measures against Iran. According to U.S. Treasury Secretary Scott Besant, intensifying the Trump administration's effort to force Tehran's capitulation after almost six months of war, Secretary Besant said all of this in an interview with Newsmax that happened yesterday. We went from epic fury to economic fury. We are going to apply measures like have never been seen in the history of economic isolation on a country.

10:51It will be a combination of economic isolation and the continued blockade in the Strait of Hormuz.

11:03That, of course, was U.S. Treasury Secretary Scott Bessett. I have to say, this is a soundbite, a comment that, or soundbites, I should say, a comment that we've been talking about a lot, certainly here in the Bloomberg newsroom. For what this might mean, will it likely happen? We're trying to make sense. Let's head to the Bloomberg News Bureau in Washington, D.C., and to Bloomberg Economic Statecraft lead, Chris Kennedy. So, Chris, I feel like we're always asking you this as our first question. What do we know? What does it mean? Is something going to get some new policy from the U.S. on Iran, some new measures?

11:41Is it likely to happen? Thanks, Carol. So I do think that we will see some new policy announcements in the next couple of weeks, as Secretary Besant discussed in his conversation on Newsmax. Weeks? Well, I think he said in the coming weeks, two weeks or something like that. We'll have to see. But these are policy announcements. Now, what does that actually mean in terms of the practical impact on Iran? We believe that the U.S. already has the tools it needs to put additional pressure on Iran, but it has stopped short of targeting some of the key financial nodes that Iran relies on for both trade and financial transactions, primarily in China, but also in the Gulf.

12:28And the reasons for that are political. These are political constraints that the Trump administration is under. There's a real concern about potential retaliation from China if the U.S. goes after major Chinese banks, for instance. And those constraints will remain regardless of what policy announcements we might see out of the administration. So we could see some new sanctions policy announcements. We could see some additional action on frozen assets, for instance. Now, whether or not that's actually going to lead to additional pressure and more important, if that's going to lead Iran to change its current posture, I think that's a separate question and we're doubtful.

13:04That's OK. Why are you doubtful? Because there's the broader question, too, about economic sanctions and whether or not they work, especially with certain regimes and regimes with certain characteristics. I think this one has proven, even though there have been changes at the top since February 28th, this one has proven that it doesn't change based on economic sanctions, at least according to what's happened in recent years. That's right. It's certain that the blockade that's currently being imposed is enacting costs on both the regime and, of course, the people in Iran. But we've seen this sort of max pressure economic isolation policy applied before, both against Iran, and then also against North Korea in 2017, when there was a massive, you know, really high-pressure sanctions effort imposed by the U.S.

13:52And we saw that that didn't change the situation in terms of the political control of North Korea. We didn't see any additional liberalization, anything like that. And we've seen that Iran is quite adept at managing the pressure that's been imposed on it by the U.S. Certainly over time, the pressure can build, And knowing Secretary Besant, he might be looking to put additional pressure on the Iranian currency. You know, Iran is dealing with pretty severe inflation right now. But the reality is this conflict is existential for the regime. And so barring some mass uprising that really topples the regime from inside, it's hard to imagine a scenario where Iran agrees to major concessions based on economic pressure.

14:38Yeah. And I mean, there's an interesting story already out on the Bloomberg today about how Iranians are struggling to afford groceries because of the U.S. squeeze on their economy already. So they're already in a tough place. Chris, what do we know about the region and their support of possibly the U.S. intensifying with economic isolation on Iran? Are they okay with this? I'm just wondering, because I'm wondering, does this just further escalate the war? It could. So, of course, the details will matter. There are Gulf Arab countries that still serve as important nodes in Iran's ability to access foreign exchange, for instance.

15:29The U.S. has so far been unwilling to target some of these nodes, in part because these are allies of the U.S. So I'm sure some of these economies and countries are going to be looking at the details of what we see over the next two weeks. I do think that there is a risk, as you mentioned. You know, we've seen Iran take a slightly more offensive posture militarily over the past few weeks, being willing to strike first. Now, if they are under pressure, we might see something like that happen again. I certainly think that that is a more likely initial response from Tehran than capitulation, for instance.

16:07Chris, I want to throw something at you that's not necessarily in your purview, but I know you've got an eye on it. And it's the idea of what we've been hearing from certain U.S. troops. in the region and the reporting around their experience, specifically when it comes to conditions abroad, the USS Abraham Lincoln. And I'm wondering if that leads the administration to make any changes to its strategy here. It's pretty terrible, the reporting that we've heard. And it's a good thing that some of these troops that have been deployed for nine months or so are returning home, I think this is certainly playing a role in the U.S.

16:50decision to focus more on the economic pressure and pull back from some of the military pressure, along with some of the other reporting about reduced, diminished stockpiles of defensive munitions in particular. So I think overall, certainly it's playing a role in this tack away from military pressure and toward economic pressure. I think the bigger question is how long can the U.S. sustain this blockade, for instance, and still be in a position to exert this pressure over time? Because right now it appears that Iran is playing a waiting game and they're willing to try to wait this out. Yeah. Does it also show, I'm going to squeeze this in 20, 25 seconds, Chris, does this show that the U.S.

17:33is saying, yeah, our military supplies are dwindling. We don't have a lot and this is what we've got to do to try and kind of bring this thing to an end. I think certainly some people are interpreting that way. And of course, the leadership in Iran is very attuned to the reporting around these issues. So it definitely doesn't put us in a good negotiating position. Yeah. It just, the twists and turns. Chris Kennedy covering it all. Bloomberg Economics, Economic Statecraft lead. Stay with us. More from Bloomberg Business Week Daily coming up after this.

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21:09So there's some concern. The war that, of course, snarled everything that's going on in the Strait of Hormuz. And it's now six months, which I was thinking about this. And I was like, remember, it was four to six weeks. I think it was what it was like in, out, in, out, not in, out, in, out, not Venezuela. No, not even close. We want to head back to Washington, D.C., talk a little bit about the global energy markets and what this, if the U.S. takes these measures, what it might mean. Clara Gillespie is Senior Fellow for Climate and Energy at the Council on Foreign Relations, joining us once again.

21:43Clara, great to have you back with us. These economic measures, unprecedented economic measures that U.S. Treasury Secretary Scott Besson has talked about. We know the U.S. has had sanctions on Tehran since 2018. We don't know exactly what this next step could mean. How are you thinking about it? What's your read on this? And what could be the implications when it comes to Iran and energy and global energy markets? Absolutely. I'll say that I read the statement with a fair amount of both curiosity and also deep skepticism. One, the details just have been scarce on what this could potentially mean.

22:24And I think we've seen a number of times over the last, as you said, now six months where the administration has periodically been very specific and bold in its rhetoric on potential measures it might take, and then quickly or relatively quickly walked them back. So some open-ended questions there. I think there are three things that I'm looking for in particular with next week and the idea that this is when we would expect to be hearing more on them. Two parts of it I think you and your prior guest have already touched on in particular. It's one, this idea of an extended blockade. Blockade itself wouldn't inherently be unprecedented, but the duration and how we sustain that is potentially the question.

23:10There's, of course, also the issue of sanctions. But I think one of the things I'm looking at in energy markets in particular is that the Trump administration, from the president to a wide range of officials, have been very concerned and focused on this question of how to reduce Iran's ability to extract value or pain from control of the Strait of Hormuz. Now, we've seen a number of approaches that have been taken that focus on reopening the strait or coming to new diplomatic negotiations, other military use of force that haven't moved the needle, to be quite frank. But one of the other things I think we're starting to see more, and not just from the U.S., but from other economies and partners as well, is this focus on reducing the significance of the strait itself to global oil markets.

23:58Thinking about alternative routes, but also sometimes direct ways to bypass the strait to reduce Iran's leverage. But we're talking years, if that's possible, not months. some things might be possible uh within the next year but a lot of what we're talking about is the you know two three year timeline is ambitious but it is in some cases notably longer than that in your is your are you are you predicting that we're going to be talking about a potentially closed or restricted straight of hormuz in a year i'd love to say no but at this point, I think both producers and buyers are assuming that they can no longer hold off on considering that scenario.

24:42Even if the Strait of Hormuz is literally open, if there's a way to navigate the strait, if we've addressed questions about mines and tolls and other things, there's still a question about how willing you are to rely on all those conditions being in place still and what your potential hedges or alternatives look like. I do think about, too, the workaround, essentially, that the region is increasingly, we're seeing stories about and reporting out. We talk our own reporting, a wave of Middle Eastern crude making its way to U.S. shores, offering some respite to a market squeezed by wartime demand for American exports, at least 9 million barrels from the region set to arrive at U.S.

25:21ports throughout August. You know, things are moving around. Infrastructure, Gulf oil producers are turning wartime alternatives to the Strait of Hormuz into longer-term infrastructure developments, with new pipeline port and LNG plants reinforcing their peak Hormuz thesis. I haven't really heard that term. But I mean, once you start to make these investments and you do the build, you don't really go back unless there's a financial, I feel like, incentive to do so. But it feels like there's a lot more at play in terms of security and making sure this doesn't happen again, or they're not so vulnerable to Iran and the strait.

26:00I think that's right. And the question of, you know, do countries go back and who are we talking about going back, I think is very much an open one. But there is this idea that whether or not the Strait of Hormuz may continue to play an important role in terms of how your exports could reach markets, you don't necessarily want it to be your only exit point. You don't want it to be your only strategy for this, some benefits to both redundancy and also just-in-case opportunities. What would that be? So, there are a couple of things that that could be. The most straightforward and some of what we're seeing right now is in terms of alternative routes.

26:44So, whether we're talking about different sea lanes, pipelines, those sort of things. Another way that you can think about redundancy or ways of increasing your insurance policy for a potential disruption in energy trade flows relates to storage as well. And we're hearing this from a number of major producers across the region, as well as importers thinking about ways to increase storage of oil and gas cargos, not in the area, but potentially much closer to major buyers in Asia. Yeah, I just I I just don't see how realistically at this point we you know, the challenge that we've talked about throughout the last.