VC investors have enabled the AI industry to bastardize revenue reporting. In the 2010s, SaaS companies popularized reporting the metric of Annual Run Rate because it was a reliable measure of long term, contractual revenues into the future. The key is that the revenues are contracted and guaranteed thru the contract life hence why forecasting it forward is appropriate. VCs have taken this to mean Annualized Run Rate when AI is concerned and where you take transactional/API revenue from the last month (or even last week in some cases) and forecast it forward. It’s insane that investors have enabled this to happen but it’s happened.
Image from Chamath Palihapitiya (@chamath)

Oct 15, 2026 · 4:00 PM UTC

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ARR now stands for Annualized Random Revenue
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yeah this is a real problem. taking one strong month of usage, multiplying by 12 and calling it ARR basically hides all the volatility that matters in AI right now. model share can move violently between releases, so I’d rather see contracted revenue, retention + how much of the run-rate survives 90 days later.
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the only reason why you are saying this is because you don't do it. If you did it, you wouldn't be telling anyone about it.
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VCs this week
Tyler Palmer (@tylerpalmer) profile pictureTyler Palmer
@tylerpalmerOct 15
tech industry measuring Anthropic’s ARR xitter.twitterapi.xyz/BleacherReport/status/…
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“I got my first PO today for $10K. So we’ve got $3.65M ARR!” And to think SaaS companies had the opposite problem. Their GAAP revenue always trailed cash revenue by a LOT, especially if they were growing fast.
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Contracted revenue earns a multiple. Last month's API usage times twelve is a forecast, not ARR. I'd ask for cohort retention first.
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💯💯 tanayj.com/p/when-arr-is-not…
Image from Tanay Jaipuria (@tanayj)
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It starts from the top: SEC has allowed public companies to get away with all types of “adjusted” and other Non-GAAP metrics for years. It’s all ridiculous.
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a run rate with no contracted share next to it is just last month multiplied by twelve
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Song catalogs earn for decades and still get priced on trailing royalties, often averaged over 3 to 5 years, with a discount for how much copyright term is left. Nobody values a catalog on last month times twelve.
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SPAC pumper giving the rest of us ethics lessons.
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ARR now means assumed receiving revenue.
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preach! also love the companies that are very clearly GMV calling it ARR lol
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proud to be voted the Best Place to Work in this hellscape.
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Accounting and reporting rules have become extremely complex and abstruse, while at the same time losing common sense. The SEC and FASB should rethink this and make reporting understandable, appropriate and comparable again.
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If your product is subscription based there doesn’t seem to be a logical reason to label the revenue ARR unless you are trying to front run actual revenue and hide churn simultaneously.
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AI startups sell fantasy revenue to desperate venture gamblers
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tbh the whole point of arr was the contract locked it in. usage that churns next tuesday isn't that
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One rumor was that ANT took a single day and multiplied it x365.
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How is this guy, who openly shilled 0 revenue companies and pillaged retail for his own personal gain, allowed to criticize anyone ever
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Elizabeth Holmes is in jail for less than that
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From my investor update, earlier in the year: "As we noted last month, we've tightened our definition of signed ARR to be as truth-seeking as possible: monthly and quarterly recurring deals no longer count as ARR (we now call that "run rate" instead), and ARR is now strictly defined as enterprise revenue that's committed for a full year and renews automatically, with a x-day opt-out period toward the end of that contract year."
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ARR nowadays is neither annual nor recurring and sometimes not even real revenue
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it'll crash / correct. it always does.
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ngl 30 day cash velocity tells the truth run rate wont
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annualized random revenue is painfully accurate lol
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Annualizing last week's API bill assumes the calendar is flat.
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saas arr actually had locked contract term guarantees calling usage based fragile ai revenue arr is wild cope
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bastardized revenue reporting highlights bad practices hurting sustainability, not just numbers
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sadly VCs have an incentive to accept this because it supports higher markups and easier follow-on rounds :/
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ARR used to mean a signed contract with a renewal date. Now it's one good month of token spend times twelve. Ask any CSM what you call revenue with no renewal behind it. A forecast.
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More unprosecuted fraud
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100%
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Same mistake as any shop owner who counts one busy Saturday as the monthly income. A contract is a promise, one month of API usage is a mood. Ask for the renewal rate before you clap for the number.
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I’ve never respected anyone less than @chamath
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Run rate meant something when it was signed contracts. Annualizing one hot month of usage is a much softer number with the same label.
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