Business 6 min read By Callum Montgomery
Анthropic’s slowing growth and rising costs cloud its IPO prospects
Anthropic’s third-quarter results showed slower revenue growth and faster rising compute costs, leading analysts to question whether a $1.5 trillion to $2 trillion IPO valuation can deliver returns for investors.
Anthropic’s planned initial public offering looks increasingly expensive and risky after the company released third-quarter financial results showing its revenue growth slowing while its expenses climbed faster than in previous quarters. Several analysts who spoke to Fortune said the numbers and historical precedent do not favour stellar returns for investors.
Institutional investors are reportedly pressing the company and its IPO advisers to price Anthropic’s shares at the lower end of the $1.5 trillion to $2 trillion valuation range it is seeking. Even that may be too high, according to analysts. Any valuation above about $1.41 trillion would require buyers to pay more than $40 for every dollar of revenue the company generated over the past year. Jay Ritter, director of the University of Florida’s IPO Initiative, found that only 14 of the 4,110 IPOs between 1980 and 2024 reached a price at that level, and those offerings delivered lower average returns than the broader market.
Against roughly $35.3 billion in revenue booked over the past four quarters, a valuation of $1.5 trillion to $2 trillion would mean investors paying between $43 and $57 for every dollar of sales. Ritter told Fortune that justifying a valuation above $1.4 trillion would require a path toward annual after-tax profits of at least $100 billion, a level only a handful of companies, including Alphabet, Nvidia, Apple and Microsoft, have ever reached in a single year.
In the third quarter, Anthropic’s revenue rose nearly 47 per cent from the previous quarter, while compute and infrastructure expenses climbed about 77 per cent to $9.9 billion. Roughly $5 billion of that compute bill came from buying short-term capacity. The company typically orders compute 12 to 18 months ahead, but must buy more expensive short-term capacity when customer demand or research needs exceed what it has secured. Anthropic attributed the fall in its adjusted operating margin to 15 per cent from 19 per cent primarily to those short-term costs.
Tomasz Tunguz, founder and general partner of Theory Ventures, told Fortune that higher compute costs would put increasing pressure on margins, although the company’s implied gross margin remained a healthy 85 per cent. Gross margin counts only the cost of serving customers and excludes the far larger sums spent training models and on research, which are booked as separate operating expenses.
Tony Trzcinka, an investment-grade portfolio manager at Impax Asset Management, said the pressure on adjusted operating margins arrived sooner than he had expected. “The key question is whether revenue can compound fast enough to absorb the future commitments and outpace compute cost,” he said. He expects the company’s existing obligations and interconnected relationships to limit its ability to borrow at the low interest rates available to investment-grade companies, meaning any debt raised to fund compute capacity would be expensive.
Campbell Hutcheson, a senior researcher at Epoch AI, argued that paying more for compute can also help generate future revenue. Frontier models can command premium prices and help improve the efficiency of other models, and because revenue growth often depends on reaching a capability or product threshold first, he said it can be rational for labs to pay a premium to get there first. Hutcheson said Anthropic continued to show “very strong growth, high gross margins” while investing heavily in research.
Anthropic reported about $131.8 billion in cash, cash equivalents and short-term investments at September 30, and its operations generated $6.6 billion in cash during the first nine months of the year. Ritter said those reserves, combined with IPO proceeds, would allow considerable investment, while Trzcinka said he would be watching further spending commitments and any borrowing under the company’s revolving credit facility.
Aswath Damodaran, a finance professor at New York University’s Stern School of Business, produced a valuation on October 28, before the third-quarter results were released, that assumed annual revenue reaching $1 trillion by 2036, a target operating margin of 27.5 per cent and an estimated $100 billion in IPO proceeds. Those assumptions produced an equity value of about $1.475 trillion, at the lower end of the $1.5 trillion to $2 trillion range. Damodaran told Fortune the third-quarter figures gave him little reason to revise that estimate, calling them “the most telegraphed 3rd quarter number of all time.” He said his earlier analysis had already discussed slowing revenue growth and continued margin volatility. “If my intrinsic value changed significantly based on this news story, it would be neither intrinsic nor value, just a pricing chase.”
Ritter likewise saw no major surprises in the third-quarter numbers, but said his research highlights the risk of paying in advance for exceptional growth. In his study, the 14 IPOs that commanded the price-to-sales ratio Anthropic is asking investors to accept delivered returns averaging 15 per cent.
Source: fortune.com
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