Anthropic compute costs rise to 58% of revenue in latest filing

Rising infrastructure costs

Anthropic is facing a significant increase in the cost of running its artificial intelligence models. According to its amended IPO filing, compute costs rose to 58% of the company's revenue during the third quarter. This represents a notable jump from the 48% share seen in the previous quarter.

While the company's total revenue grew to $17 billion, the efficiency of that spending took a hit. The filing shows that revenue per dollar of compute fell to 1.72x, whereas it had been just over 2x in the quarter before. This indicates that the company is spending more on hardware and processing power for every dollar it earns.

The discrepancy is largely tied to how Anthropic is currently procuring its computing power. As reported by The Next Web, the company's infrastructure bill reached $9.9 billion in the quarter. A large portion of this spending is tied to immediate needs rather than long-term, discounted agreements.

The price of speed

A major factor in the margin dip is the reliance on short-term compute commitments. Anthropic spent about $5.0 billion on these short-term arrangements, which the filing notes cost significantly more than comparable compute bought under multi-year contracts. This suggests the company may be prioritizing immediate access to hardware over the lowest possible price.

The filing attributes some of these weaker margins to specific deals with smaller cloud providers. One example cited is a partnership with Nscale, a provider based in Britain. These types of arrangements can be more expensive than the massive, long-term contracts the company prefers to use for its primary operations.

Anthropic intends to correct this imbalance as it scales its infrastructure. The company stated it can swap out these expensive short-term commitments for cheaper long-term capacity. This transition is expected to happen as the company moves toward its own dedicated hardware solutions.

The Anthropic Direct plan

To solve the high cost of third-party cloud computing, Anthropic is developing a program called Anthropic Direct. This initiative involves building and running dedicated data centers specifically for the company's needs. By owning or controlling the physical infrastructure, the company hopes to bypass the premium costs of short-term cloud rentals.

This move toward vertical integration is a common strategy for large tech firms looking to stabilize their overhead. By securing their own data centers, Anthropic can lock in lower electricity and hardware costs over several years. This would theoretically improve the revenue-per-dollar ratio that has recently trended downward.

The company is also navigating complex financial arrangements to fund this expansion. They have entered into various agreements with chip manufacturers and financiers to ensure they have the necessary hardware. These deals are designed to support the construction of the very infrastructure that will eventually lower their operating costs.

Complex hardware financing

Anthropic's path to cheaper compute involves a web of sophisticated financial instruments. For instance, a group of major banks, including Bank of America and Morgan Stanley, will fund a new company to buy Broadcom chips and lease them to Anthropic. This arrangement is designed to provide a steady supply of hardware starting in 2027.

The company also has a facility with Broadcom that allows it to pay rent with up to $42 billion in convertible notes. These notes carry a 9% interest rate and can be converted into shares at a discount. If Anthropic misses certain revenue targets, the discount on those shares increases, providing a buffer for the chip manufacturer.

Other suppliers are also tying funding to their hardware deployments. AMD, for example, has committed to buying up to $5 billion in Anthropic shares as its GPUs reach specific delivery milestones. These partnerships show how deeply intertwined the AI industry's hardware supply chain has become with its primary software developers.

Financial health and outlook

Despite the rising costs of compute, Anthropic maintains a very strong liquidity position. The filing shows the company held $146.6 billion in cash, short-term investments, and available bank credit at the end of September. This massive reserve provides a significant cushion as the company prepares for one of the largest stock market listings on record.

The company's personnel costs also saw a slight decrease during the quarter. Spending on staff fell to $1.711 billion, down from $1.857 billion in the previous period. This was largely due to some option awards becoming fully vested, which reduced the immediate expense of employee compensation for that specific timeframe.

The long-term goal for Anthropic remains balancing rapid growth with sustainable margins. While the current high cost of compute is a challenge, the company's strategy of moving toward dedicated data centers suggests it is focused on long-term efficiency. Investors will be watching to see if the Anthropic Direct program can successfully lower the cost of every dollar of revenue generated.