"Serious inflation of annual revenue at AI startups"... Why is tripling the numbers possible?

Spellbook CEO Scott Stevenson says many AI startups are overstating ARR by counting future value from three-year deals and cancellable contracts as if it were current revenue.

He warned this can make a company with about $35 million in true ARR look like a $100 million business.

Stevenson also said the metric ignores engineering costs and the risk of customer renegotiations or cancellations, which could distort valuations across the sector.