Anthropic’s planned IPO is facing growing concerns over its valuation after third-quarter results showed revenue growth slowing while computing and infrastructure costs rose sharply.
Analysts said the company’s proposed valuation of between $1.5 trillion and $2 trillion would leave investors paying a premium rarely seen in the public markets. Institutional investors are reportedly pressing Anthropic and its advisers to price the offering towards the lower end of that range.
Even that level may prove difficult to justify, according to Jay Ritter, director of the University of Florida’s IPO Initiative. Based on Anthropic’s revenue of about $35.3 billion over the past four quarters, the proposed valuation would value the company at between 43 and 57 times annual sales.
A valuation above roughly $1.41 trillion would mean paying more than $40 for every dollar of revenue, a threshold reached by only 14 of the 4,110 companies that went public between 1980 and 2024, according to research by Mr Ritter.
Those 14 IPOs produced average returns 15.4 per cent below the wider stock market, measured from their offer prices over holding periods of up to three years. Some performed better than the market, but Mr Ritter said Anthropic would need “a lot of things to go right” for its revenue and profits to support such a high valuation.
Anthropic’s costs rise faster than revenue
Anthropic’s revenue increased by nearly 47 per cent from the previous quarter. However, computing and infrastructure costs climbed by about 77 per cent to $9.9 billion, with roughly half that amount spent on short-term capacity.
The company usually orders computing capacity 12 to 18 months in advance, but must buy more expensive short-term capacity when customer demand or research requirements exceed its contracted supply. The additional spending contributed to a fall in its adjusted operating margin from 19 per cent to 15 per cent.
Tomasz Tunguz, founder and general partner of Theory Ventures, said higher computing costs would place increasing pressure on Anthropic’s margins. He noted that the company’s implied gross margin remained about 85 per cent, although that measure excludes the much larger costs of training models and conducting research.
Tony Trzcinka, an investment-grade portfolio manager at Impax Asset Management, said pressure on adjusted operating margins had arrived sooner than he expected. “The key question is whether revenue can compound fast enough to absorb the future commitments and outpace compute cost,” he said.
Mr Trzcinka said Anthropic’s existing obligations and interconnected relationships could restrict its ability to borrow at the low interest rates available to investment-grade companies. Any borrowing to fund computing capacity could therefore prove expensive and weigh further on margins.
Campbell Hutcheson, a senior researcher at Epoch AI, said higher computing expenditure could nevertheless help generate future revenue. Frontier models can command premium prices and improve the training and inference efficiency of other models, he said, adding that it could be rational for companies to pay more to reach important capability or product milestones first.
Anthropic had $131.8 billion in cash, cash equivalents and short-term investments at the end of September. Its operations generated $6.6 billion in cash during the first nine months of the year, giving it significant resources to continue investing alongside any proceeds from an IPO.
Analysts question the proposed IPO valuation
Aswath Damodaran, a finance professor at New York University’s Stern School of Business, estimated on October 28 that Anthropic could be worth about $1.475 trillion. His calculation assumed that annual revenue would reach $1 trillion by 2036, an operating margin of 27.5 per cent and $100 billion in IPO proceeds.
That valuation was produced before the latest results. Mr Damodaran said the figures gave him little reason to change his assessment, describing them as “the most telegraphed 3rd quarter number of all time”. He said his earlier analysis had already accounted for slowing revenue growth and continued margin volatility.
Mr Ritter said a valuation above $1.4 trillion would require Anthropic to develop a route towards annual after-tax profits of at least $100 billion. Only a small number of companies, including Alphabet, Nvidia, Apple and Microsoft, have achieved that level of annual earnings, he said.
The company has considerable potential, Mr Ritter said, but the scale of the proposed IPO means investors would be paying in advance for exceptional growth and profitability that Anthropic has yet to deliver.
