Anthropic's Historic IPO Has Arrived | S1 Breakdown

00:00:00 · CJ GustafsonPlay from here

[00:00:00] S0: It is here, folks. This is the Anthropic IPO s one breakdown. We've been waiting for this to drop for, I don't know, feels like forever. This is my Super Bowl. I'm gonna take you through the fastest growing company with the most mind blowing efficiency metrics I've ever seen. The IPO ever. Get ready for the Anthropic s one breakdown. Is this thing on? Yesterday's price is not today's price. The Anthropic s one dropped yesterday morning and it was such a momentous occasion that my wife made me pancakes. So we've been together for thirteen years and the number of times she's made me pancakes, I can count on two hands. So it was a glorious and delicious human moment as I set off to work to cover a human like technology that will either zap us from humanity or cure cancer and help us all live until 200. For the record, we won't be touching the third rail in this piece as to whether our existence is threatened. I'm bringing this syrup today. Pearl Milling Company, formerly Anthropic filed to list in the Nasdaq under the ticker ant. The price range is still blank, but bankers have told investors a deal could raise 100,000,000,000 or more at a valuation near 2,000,000,000,000, and that's according to the New York Times. So the last private round was 65,200,000,000 raised during their series h that closed in June at a reported 965,000,000,000 valuation. So a little bit more than twice as much as that last valuation in the private market. So they say, for the first time in history, intelligence is something humans can build. That is a scary and motivating sentence. Anthropic did nineteen point seven billion of revenue over the trailing twelve months ended 06/30/2026. The second quarter alone was 11,600,000,000, which was up, wait for this, 1368% year over year. The three biggest questions from my PPOV, that is pancake point of view, is number one, can you be the most impressive technology to ever exist and also a commodity where your evaluation gets driven down? Two, will the use cases keep growing as fast as the model costs are dropping? And three, is there such a thing as having too many partners at the party? Key stats revenue 16,300,000,000 for the first six months of twenty twenty six, up 1300% year on year. That's up from 1,200,000,000 in the first half of twenty twenty five. Q two twenty twenty six was 11,600,000,000, up 144% from q one.

00:02:15 · CJ GustafsonPlay from here

That revenue is blank in the filing even though September has come and gone. They will no doubt have that in before the IPO. Revenue mix, 80% coming from consumption, 20% from subscription. So consumption, which they call pay for intelligence, is metered in tokens and priced by model. It was 13,100,000,000 of the first half, 16 and change billion in revenue. Subscriptions were 3,200,000,000 up from 17% of revenue in 2025. This is the classic 8020 folks. Customers paying $100,000 or more. They have 11,900. Wow. That's up for more than 950 a year earlier, and more than 1,900 pay $1,000,000 or more, and about 250 pay 10,000,000 or more. Another 40,000,000 customers each pay less than 100,000. Okay, here's a spicy one. Net revenue retention 900%. So this is measured as this quarter's revenue from customers who spent at least a dollar in the same quarter a year ago, and pro and max subscribers are excluded. So your boy wasn't in that count, but I I like to use it, you know. Customer concentration, no customer over 10% of revenue for the nine months ended September 30. But 79% of q three revenue came from outside the top five customers, which is up from 64% in q one. Revenue from each of the top five still hit a record in q three despite that mix shift. But 48% of first half revenue came through the cloud marketplaces that was up from 11% in 2023, representing 58% of receivables. Shout out to all my folks and accounts receivables holding down the fort. Operating income 974,000,000 in q two and eight percent margin. Well, that's a positive number. What are we seeing here? The only quarter in the filing with an operating profit. Good quarter to go public, right? The first half overall was still a $693,000,000 operating loss. Adjusted operating income, 2,200,000,000 in q two, a 19% margin, 1,600,000,000 for the first half, a 10% margin. This adds back stock based comp and non cash charitable donations plus the 1,500,000,000 from that Bart settlement for copyright and shenanigans in 2025. Can't do that. Net loss is 80,700,000,000 for the first half. 72,000,000,000 of that is from marking up convertible notes as the valuation went up, and 8,800,000,000 is mostly a fair value charge, a note purchase agreement. So almost none of that is non cash. Right? The valuation is just going up and it hits the p and l.

00:04:29 · CJ GustafsonPlay from here

Adjusted net income was a positive 2,700,000,000, adjusted, very adjusted. Compute and infrastructure, who's footing the bill for this? My goodness, 8,900,000,000 for the first half, 55% of revenue. That was down from 201% of revenue a year earlier. Q two alone was 48%. Q two revenue grew 1368% year on year, while compute grew 300%. Gross margin about 85% in the first half. If you back into it, back up the bus. They switched the income statement to expense types in 2025. I caught you. But the footnotes still break out cost of revenue, 2,400,000,000. Again, 16,300,000,000 of revenue. And so up from 40% in 2025 and ninety five percent in 2024. Free tier compute and channel partner fees sit in sales and marketing. Okay? It's like their cost of going to market and acquiring customers even though it's typically in COGS. So the fully loaded number is lower. More on this later because it ain't 85% even though you could kind of see it might be 85, it's not 85%. Stock comp 2,200,000,000 in the first half, must be good to be buying a house in San Francisco right now. Another 2,900,000,000 gets recognized at the IPO, then 23,700,000,000. My goodness. Over about two point one years plus 3,100,000,000 on other awards. I'm saying, oh my goodness, as if I didn't write this before. I don't know. Every time, know, sometimes I surprise myself in my own writing. This will continue to throw off the casual investor when they have to see such a large loss that is due to their success and totally non cash. Interest income. This is just funny to me. 1,100,000,000 in interest income in the first half because they still have so much cash. 762,000,000 of that was in q two. So this is larger than most public companies full year revenue that I cover week to week in my newsletter. Okay? So in six months, they've made 1,100,000,000 in interest revenue. Just hilarious. Operating cash flow, 3,900,000,000 in the first half compared to 1,500,000,000 a year earlier. CapEx was only 482,000,000 because compute was mostly been financed through agreements with the cloud providers. That what you call payment in kind of not getting into that accounting treatment cash. 131,700,000,000 at June 30. 112,000,000,000 of cash plus 19,000,000,000 of short term investments. They've raised a 141,000,000,000 to date. Compute commitments, they kind of left this blank in here.

00:06:44 · CJ GustafsonPlay from here

Aggregate committed spend of more than blank running through 2045. How you gonna leave us hanging like that? Employees 5,300, up from 940 at the end of twenty twenty four. Imagine being in that Slack channel, like, who are all these people? TTM revenue per employee is over 6,600,000, up from 1,400,000 a year earlier. That is crazy. The offering, the price range and share count are blank. Goldman, Morgan Stanley are joint representatives, then JPMorgan, Citi Barclays, and Wells Fargo, and another 22 banks. It's a controlled company with five classes of common stock, which we will go over. They did it 10 for one split on September 17. I'm gonna level with you. This was the best shareholder letter I've ever read. And I have to admit, even if it was written by Claude, I don't really know. This thing slaps. It goes from we will try to cure cancer, to here's why you might not want to buy this, to an explanation of what exponential really looks like, and why they're going to make some investments that look, quote, irresponsibly large on paper, but are justified in this new world. This really... This letter really had it all. Quote, we believe that AI is one of the most consequential technologies in human history. If managed well, it could rapidly accelerate scientific innovation, greatly increase economic growth rates, bring cures for major diseases within reach and solve problems that have resisted generations of human effort. They lead with the scientific angle, cure diseases and extend life. I think that's very thoughtful positioning versus potentially killing us all. And they namedrop a bunch of diseases that they hope to cure, which is dope. That's awesome. Then they hit you over the head with the four things they want any investors to understand. The potential of AI, the risks, how Anthropic is built differently, and the ways in which our behavior may differ from that of a purely profit maximizing company. Quote, we believe that the impact of an exponential and machine cognition will be vastly greater even than that of the exponential in computer chips. Where it ends up is what they call a country of geniuses in a data center. Millions of virtual agents with the ability revolutionize every area of human endeavor. And boy, oh, boy, is that a weird ass statement to put in there? They hit us with this anti sell.

00:08:59 · CJ GustafsonPlay from here

Before starting the IPO process, we spoke to many business leaders who had gone through a similar process in the past. One piece of advice, which we heard in slightly different forms from multiple people stuck with us, never let your company be worth a dollar more than it is actually worth. But like also value us at Qtroian. What they're saying here is the same thing that they do in recruiting where candidates get like this anti sell pitch of like, it really sucks to work here. You know, you do not wanna work at Anthropic. Then they warn you of surprises coming down the pike. So if it first would be spending, business bets that derive from AI's wild exponential trajectory but seem strange or unorthodox in isolation, and on the public good side, decisions that depart from profit maximization in order to appropriately balance the public good. Quote, Anthropic will often make forward investments, especially in compute that may seem irresponsibly large at first glance. Hair cover, they compare it to pharma where you get these huge upfront r and d investments, and they only make sense later in light of the returns from successful drugs. Except for Anthropic, it's a similar process that's occurring much faster and on a much larger scale. Their stated approach is to, quote, be bold but sane. They've also committed to keeping Claude free of advertising. That's a that's a weird choice to, like, say, we're not going to do this one, like, major business model that has funded a ton of the innovation in the economy. And they say there may be time that they choose to advance more slowly than they could, even if that puts us at a competitive disadvantage. They sign off asking you as a prospective owner to quote, not to think of your purchase in purely transactional terms. I left thinking I would buy a used Chevy Avalanche from them. A refresher where Anthropic sits in the AI stack. So if you read our n scale s one breakdown, you've seen the five layers of AI. So first, got power, so that's the electricity itself in the grid or generated on-site, or maybe nuclear. Then you got land and data centers, the buildings, the cooling, the grid connections that turn power into usable space for servers, then you get the chips, the GPUs and other accelerators plus the networking gear that ties them all together, all those bungee cords.

00:11:13 · CJ GustafsonPlay from here

Then you get cloud software, the layer that schedules jobs and keeps the hardware running. And five, the models and apps. You get an Anthropic, OpenAI, and everyone building on top of them. So Anthropic lives at layer five. It rents most layers one through four from the Amazons, the Googles, the Microsofts of the world, and it trains in... Serves cloud across four chip families. You got Amazons, Googles, Nvidia's, and AMVs. But it's starting to reach down the stack, and what I is they're gonna vertically integrate here. They call it Anthropic direct, leasing chips directly and hosting them in dedicated facilities operated on their behalf, which now puts equipment leases and committed power costs on their own p and l. The filing also mentions guarantees to developers to get data capacity built. Quote, as we continue to build out our own computing infrastructure and further vertically integrate across the compute supply chain.