Anthropic investors push for lower valuation amid slowing revenue growth

A cooling growth trajectory

Anthropic is preparing for its initial public offering (IPO) while facing a significant shift in its growth momentum. According to a new S-1 filing, the company's sales rose 47% sequentially in the third quarter. This represents a sharp deceleration compared to the 144% growth seen in the second quarter and 132% in the first quarter.

While the third-quarter revenue of roughly $17 billion was up 1,127% compared to the same period last year, the quarter-over-quarter slowdown is notable. This trend comes at a time when tech stocks, especially those providing AI and data center infrastructure, have been pressured by concerns over excessive spending. The market is beginning to weigh the actual costs of AI development against the current pace of returns.

The filing also highlights a shift in the company's bottom line. Anthropic reported a net loss of $23.29 billion during the third quarter. This followed an operating loss of $567 million, which stands in contrast to the $974 million operating profit the company reported in the second quarter.

Valuation adjustments and risks

As the company moves toward its public debut, institutional investors are pushing for a more modest valuation. Reports from the Wall Street Journal indicate that these investors are advising Anthropic to target a valuation between $1.5 trillion and $1.6 trillion. This is a significant step down from the $2 trillion figures that had been discussed in recent months.

Several factors are driving this more conservative stance from the investment community. These include choppy market conditions and a perceived overexposure to AI-related bets. There is also growing concern regarding political backlash against data centers and uncertainty about when major hyperscalers like Meta Platforms and Amazon will see actual profits from their AI investments.

The updated S-1 filing provided the data necessary to fuel these concerns. It revealed rising costs and growing future spending commitments that were not as prominent in earlier drafts. These factors have contributed to a more cautious atmosphere for the company's upcoming roadshow and eventual listing on the exchanges.

Massive infrastructure commitments

One of the most striking details in the new filing is the scale of Anthropic's future spending. The company disclosed spending commitments totaling $895.4 billion, which are scheduled to stretch as far as 2045. This figure is notably higher than the $800 billion that analysts had previously estimated from an earlier draft of the prospectus.

The pace of this spending is intended to be front-loaded to support immediate growth. Anthropic expects to spend nearly half of that total amount by December 2030. Specifically, the company plans to spend about $69.8 billion in the 12 months following September 30 of this year to maintain its position in the market.

To fund these massive requirements, Anthropic currently holds $146.6 billion in cash and other liquid assets. However, the sheer size of the $895.4 billion commitment highlights the capital-intensive nature of the AI industry. It underscores the reality that staying competitive requires enormous, long-term investments in hardware and computing power.

The road to the IPO

Major tech giants including Amazon, Alphabet, and Nvidia are significant investors in Anthropic and stand to benefit from the public offering. The company is currently preparing to kick off its investor roadshow to drum up interest before the official listing. This process will involve pitching the company's long-term vision to a wider pool of public market participants.

Market sentiment regarding the upcoming debut remains mixed. On the social platform Stocktwits, retail sentiment for the ticker has been described as 'bearish.' This reflects a broader anxiety about whether the company can justify its high valuation given the current economic environment and the high costs of its operations.

Timing for the listing is also a point of speculation among market observers. Some traders suggest the company could begin trading as early as November 12. They note that if the S-1 filing does not become effective by then, the company would likely need to amend the filing to include the most recent third-quarter financial statements.

What comes next for Anthropic

The upcoming IPO will serve as a critical test for Anthropic's ability to balance its ambitious growth goals with the reality of high operational costs. The company must convince the public market that its $895.4 billion spending plan will eventually lead to sustainable profitability. Investors will be looking closely at whether the company can maintain its lead as competition from other AI labs intensifies.

The transition from a private valuation of $1.41 trillion to a public listing will also be a test of market appetite for AI infrastructure. If the company accepts the lower $1.5 trillion to $1.6 trillion valuation suggested by investors, it may be a strategic move to ensure a smoother entry into the public markets. This could provide a more stable foundation for the company to navigate the current volatility in the tech sector.

Ultimately, the success of this IPO will set a precedent for other high-growth AI companies seeking to go public. It will signal whether the market is willing to reward the massive capital expenditures required to build next-generation models. The next few months will be decisive as Anthropic completes its roadshow and prepares for its first day of trading.