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BusinessQuiet 8d · day 9

Anthropic Q3 results dim IPO prospects as compute costs surge

Slowing revenue growth and ballooning infrastructure expenses threaten the AI firm's $1.5T–$2T IPO valuation.

newest coverage 7d agosummary written 7d ago4 pieces NewswiresMastodonGoogle News

What to know

  • Anthropic's Q3 results show revenue growth slowing to 47% quarter-over-quarter while compute expenses surged 77%, forcing the company to buy expensive short-term capacity and compress margins from 19% to 15%.
  • At the proposed $1.5T–$2T IPO valuation, investors would pay $43–$57 per dollar of annual revenue—a historically expensive multiple that only 14 IPOs since 1980 have commanded, and those underperformed the market.
  • Analysts say Anthropic would need a path to $100 billion in annual after-tax profit to justify valuations above $1.41 trillion, a threshold reached by only a handful of mega-cap firms.
  • Institutional investors are reportedly pressing for lower IPO pricing, citing concerns that margin pressure from compute commitments and expensive debt financing threaten future returns.

“Any IPO valuation above about $1.41 trillion would ask Anthropic's buyers to pay more than $40 for every dollar the company generated in revenue over the past year—a price level achieved by just 14 of the 4,110 IPOs that took place between 1980 through 2024”

Jay Ritter, Director, University of Florida IPO Initiative · Fortune ↗ · Nov 1

Anthropic AI company preparing IPOJay RitterJay Ritter Director, University of Florida IPO InitiativeTony Trzcinka Investment grade portfolio manager, Impax Asset ManagementTomasz Tunguz Founder and general partner, Theory VenturesCampbell Hutcheson Senior researcher, Epoch AI

Anthropic Q3 results dim IPO prospects as compute costs surge
fortune.com

How it unfolded 1 development · click the chart to see its coverage articlesposts

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Nov 3Nov 4Nov 5Nov 6Nov 7Nov 8Nov 9yesterdaynow · 5:43 AM ET
  1. 1

    Institutional investors reportedly push for lower IPO pricing

    Institutional investors are reportedly pressing Anthropic and its IPO advisors to price the company at the lower end of the $1.5 trillion to $2 trillion valuation range, signaling skepticism about current pricing expectations.

    “The key question is whether revenue can compound fast enough to absorb the future commitments and outpace compute cost…”
    — Tony Trzcinka, Investment grade portfolio manager, Impax Asset Management · source
    1. 1 outlet Anthropic’s third quarter results mean IPO math and history are not on its side, analysts say

      first by Fortune, 7d ago

  2. background

    Analysts say Anthropic's IPO valuation is historically expensive and risky — Analysts argue that Anthropic's proposed $1.5 trillion to $2 trillion IPO valuation asks investors to pay $43–$57 per dollar of annual revenue. According to University of Florida IPO Initiative director Jay Ritter, only 14 of 4,110 IPOs between 1980 and 2024 achieved similar price-to-sales multiples, and those IPOs delivered below-market returns. To justify valuations above $1.41 trillion, Anthropic would need a path to annual after-tax profits of at least $100 billion—a threshold only a handful of companies like Alphabet, Nvidia, Apple, and Microsoft have reached.

  3. background

    Anthropic releases Q3 results showing margin pressure — Anthropic's third-quarter results reveal revenue rose nearly 47% from the previous quarter, but compute and infrastructure expenses climbed 77% to $9.9 billion. The company's adjusted operating margin fell to 15% from 19%, primarily due to purchasing expensive short-term compute capacity—about $5 billion of the $9.9 billion total—when customer demand exceeded pre-ordered capacity. The company typically orders compute 12 to 18 months in advance.