From Eyeballs to ARR: Buzzy Pricing Metrics and the AI Trade!

As the Anthropic IPO approaches, it is worth remembering that IPOs are priced by VCs and bankers, not valued, and that pricing can often be on metrics that are unfamiliar. That has always been the case for young companies, with pricing scaled to website visitors and eyeballs in the dot com era to the numbers and subscribers in the social media decade. With AI, the metric that companies have latched on to is the annualized revenue run rate (ARR), where you take revenues in a recent period (weekly, monthly) and annualize it. In this session, I start with a look at the characteristics of young companies, which include small and fast-growing revenues, operating losses, negative cash flows and concerns about survival, and why many investors choose to give up on valuing these companies, because of these characteristics. Instead, they price these companies, but pricing is challenging as well, with pricing metrics, peer group choice and company differences all throwing wrenches in your work. All through the session, I use Anthropic and OpenAI was my lab experiments to illustrate both the challenges and solutions. Those expecting a resolution to the question of whether to bid for Anthropic shares at the offer price will be disappointed, but I hope that the framework for pricing endures and helps you make that decision. Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/PricingAI.pdf Blog post: https://aswathdamodaran.blogspot.com/2026/10/from-eyeballs-to-annual-run-rates-arr.html