Distinguishing real money from marketing hype requires looking past the 'AI' label in press releases. High Price-to-Sales ratios often signal that investors are paying for a future that hasn't arrived. To see if the revenue is real, track the composition of sales. Is the money coming from recurring software subscriptions, or is it one-off consulting fees to help clients set up hardware?
Consulting revenue is harder to scale. It trades human hours for dollars, which eventually hits a ceiling. True AI scalability shows up in high gross margins. If a company spends heavily on compute costs or manual data labeling to fulfill every new contract, they aren't a high-margin software powerhouse; they are a service business wearing a tech mask.
Look at customer concentration. If a few large clients provide most of the revenue, the growth is fragile. Also, check the
