AI ARR needs a gross margin test
A lot of AI companies are announcing they grew ARR to 8 or 9 figures in just a few months.
First, congratulations. That is impressive. But we should be careful not to compare apples to oranges.
In traditional SaaS, revenue often came with 80%+ gross margins once the product was built and scaled. In many AI businesses, a meaningful part of every dollar goes back into compute, inference, model costs, and infrastructure.
That does not make these bad businesses. It just means the revenue profile is different.
A grocery store can be a great business. So can a software company. But $100M of grocery revenue and $100M of high-margin SaaS revenue are not the same thing.
The better question is not how fast ARR is growing. It is how much durable gross profit is left after serving the customer. That is where the real comparison should start.
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