Over the weekend, Anthropic announced they'd tripled their annualised revenue in the first quarter of this year.
Good for them. Genuinely.
But I want to talk about why that headline made me pause... and why it should make you pause too — not necessarily about Anthropic specifically… but about what revenue as a number actually tells you.
The short answer is, less than you think.
On the surface, revenue is a pretty simple number to understand
But unfortunately, we can’t get away with surface level analysis… especially when it comes to how companies report revenue
Because realistically, revenue just tells you that some customers showed up at some point in time…
And the history of investing is littered with companies that had customers showing up while quietly destroying every dollar of value in the process.
Take Beyond Meat…
In 2025, their annual revenue was higher than the company’s entire market cap…
Why? Because their cost of goods sold (the raw cost of actually making and shipping the product) came in at 101.5% of net revenues.
Meaning they were spending more to make each “burger” patty than they were charging customers for it.
Every burger sold was a small act of self-destruction… and that's before you count a single dollar of salaries… marketing… or any other running costs.
No wonder the stock is down 99% in the last 5 years…
And then there's the extreme case - Enron
What most people don't know is that Enron's top line was genuinely fictional.
They were booking the estimated total value of long-term energy contracts as revenue in the current period...
Meaning that the cash from these deals might arrive years later, or in some cases never arrive at all.
They were also selling assets to shell companies they secretly controlled and booking those transfers as revenue too.
We all know how this one ended… with the largest corporate bankruptcy in US history at the time.
Ya'know, when an accounting trick can turn a largely empty business into one of America's most admired companies for five straight years, "revenue" stops being a fact and starts being a narrative.
So when I see a headline like Anthropic's… tripled annualised revenue in Q1 — my first question isn't "wow, how'd they do that?"
It's a more skeptical approach…
What's the revenue recognition policy? Is this growth structural or is it riding a wave of enterprise AI spend that could contract the moment CFOs start asking whether it's generating a return?
I'm not saying Anthropic is cooking the books and I have no reason to believe that.
But revenue, especially for earlier stage companies that aren’t near profitability… is the number a company can put its best spin on… which is why smart investors treat it as a starting point… rather than a conclusion.
The number that's harder to fake is free cash flow (and even that has it’s drawbacks)
It’s a number which tells you whether the business model actually generates real money… or whether it's simply a machine for converting investor capital into cool sounding headlines.
And this is exactly the kind of analysis we run inside The AI Stock Investor… cutting through the headline numbers to find out whether the underlying business actually holds up.
Oliver