Glossary·Written by a CPA
Run rate
Also called: Annualized revenue
A company's most recent month (or quarter) of revenue multiplied out to a full year.
A run rate basically just means taking the latest month of sales and multiplying it by 12, or the latest quarter and multiplying it by 4, to show what a full year would look like if nothing changed.
Fast-growing companies like it because it makes the number as big as it can honestly be, and it's not a GAAP figure.
For you, it's useful as a snapshot of where the business is right now, but it's not revenue that has actually been booked over 12 months.
Example. As an example, if a company did $5 billion of revenue last month, its run rate is $60 billion, even if its actual revenue over the last 12 months was $30 billion.
The catch. Check which number a valuation uses. The same company on the same day can look like 40 times trailing revenue or 17 times run-rate revenue.
Where I talk about it
- Anthropic IPO- Opportunity of the Year or AI Bubble? at 1:17
- Anthropic Stock (ANT) IPO at $70-$78: Buy Day 1 or Wait? at 3:35
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This is education, not tax or investment advice. I'm a CPA, but I'm not your CPA. Full disclaimer.