The industry has seen surging growth in recent years. Strong AI investments in the mid- to late 2010s saw a raft of new companies enter the industry. Many of these companies have now entered commerciality and begun generating meaningful revenue. ChatGPT’s public release has also supported the industry, pushing AI’s capabilities into the public consciousness and encouraging companies to actively explore how they can integrate AI into their operations. Overall, industry revenue is expected to grow an annualised 15.6% over the five years through 2024-25, to reach $3.4 billion. Negative or extremely thin margins over the past decade have largely been a symptom of success. Strong investment growth in the 2010s drove up enterprise numbers, which led to average industry margins declining rapidly. AI firms have long development cycles and often take years to become commercial, relying largely on investment funding to support their operations. A glut of new companies has led to negative or extremely weak margins since 2013-14, but margins are set to start improving in 2024-25 as more AI companies enter the commercial phase of their development The industry’s demand base is expanding, driven by AI products’ increased accessibility and the excitement stoked by ChatGPT’s launch. Rapid AI technology advancements have also improved AI products’ functionality and applicability, creating a rapidly expanding total addressable market. These factors are forecast to support strong growth over the coming years, but a high interest rate environment, elevated inflation and economic uncertainty are projected to partially offset this growth. These economic headwinds may slow the investment funding that Australia’s AI industry is highly reliant on. Overall, industry revenue is projected to grow at an annualised 13.1% through the end of 2029-30, to reach $6.3 billion.