Anthropic investors push for lower IPO valuation as growth slows

Slowing growth and market pressure

Anthropic recently updated its S-1 filing, which is the official document a company must submit to the SEC before going public. The new report highlights a notable cooling in the company's sales pace compared to previous months. While the company is still growing, the rate of that growth has decelerated sharply as it prepares for its initial public offering (IPO).

According to the filing, Anthropic's sales rose 47% sequentially in the third quarter. This figure represents a steep decline from the 144% growth reported in the second quarter and the 132% growth seen in the first quarter. This trend suggests that the initial explosive demand for the company's AI services may be stabilizing.

The shift in momentum comes at a difficult time for the broader tech market. Investors have been concerned about the high costs of AI and data center infrastructure, leading to depressed stock prices for many tech companies. As a result, some institutional investors are now advising Anthropic to target a lower valuation than previously expected.

The valuation tug-of-war

For several months, market speculation suggested that Anthropic could be valued at $2 trillion or more. However, the latest reports indicate that some investors are pushing for a more conservative price tag. These stakeholders are advocating for a valuation in the range of $1.5 trillion to $1.6 trillion for the upcoming IPO.

This push for a lower price is driven by several risk factors identified by the Wall Street Journal. These include choppy market conditions and a general overexposure to AI-related bets. There is also growing uncertainty regarding how quickly major companies like Meta and Amazon can turn their massive AI investments into actual profits.

Additionally, the company faces potential political backlash regarding the construction of data centers. These concerns, combined with the slowing revenue pace, have created a more cautious environment for the company's public debut. Investors want to ensure the company is priced realistically against these mounting headwinds and market volatility.

Massive spending and net losses

The updated filing also revealed a significant increase in the company's future financial commitments. Anthropic disclosed spending commitments totaling $895.4 billion, which extend as far as 2045. This figure is higher than the $800 billion that analysts had previously estimated from earlier drafts of the prospectus.

The company plans to spend nearly half of that total amount by December 2030. This includes a specific commitment of approximately $69.8 billion in the 12 months following September 30 of this year. Such large-scale spending highlights the intense capital requirements needed to maintain and expand their AI capabilities.

Despite the high revenue, the company's bottom line shows significant losses. Anthropic reported a net loss of $23.29 billion during the third quarter. It also reported an operating loss of $567 million, which is a notable decline from the $974 million operating profit it recorded in the second quarter.

Cash reserves and major backers

To balance its heavy spending and losses, Anthropic maintains a substantial amount of liquidity. The filing shows the company has $146.6 billion in cash on hand and other liquid assets. This capital provides a buffer as the company navigates its transition from a private entity to a publicly traded one.

The company's journey to the public market is supported by some of the largest names in technology. Amazon, Alphabet, and Nvidia are all major investors in Anthropic. These companies stand to reap a significant windfall once the IPO is finalized and the shares begin trading on the open market.

The company is currently preparing to kick off its investor roadshow. This is a series of meetings where the company presents its business plan to potential large-scale investors. The goal is to build the necessary momentum to finalize the IPO and set the official price for the new shares.

Timeline for the public debut

Market observers are closely watching the timeline for when Anthropic will actually begin trading. Some retail traders have speculated that the company could start trading on the exchanges as early as November 12. These predictions are based on the rules surrounding how long an S-1 filing can remain effective before needing an update.

The latest financials included in the current S-1 filing are from June 30. Because the filing must be relatively recent to be effective, the company has a limited window to go public before it must provide new quarterly data. If the company misses the November 11 deadline, it would likely need to amend the filing to include the Q3 results.

The final outcome of the IPO will depend on how the company manages these disclosures and investor expectations. While the company remains a dominant force in the AI space, the transition to a public company requires balancing high growth ambitions with the reality of rising costs and a cooling market.